ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If the increase in demand is more than the decrease in supply, the equilibrium quantity increases. If the increase in demand is less than the decrease in supply, the equilibrium quantity decreases. In both cases, equilibrium price increases.

Detailed explanation-2: -An increase in demand and a decrease in supply will cause an increase in equilibrium price, but the effect on equilibrium quantity cannot be detennined. 1. For any quantity, consumers now place a higher value on the good, and producers must have a higher price in order to supply the good; therefore, price will increase.

Detailed explanation-3: -If the increase in demand is more than the increase in supply, the equilibrium price increases. If the increase in demand is less than the increase in supply, the equilibrium price decreases. In both cases, equilibrium quantity increases.

Detailed explanation-4: -Increase in demand increases the quantity. Decrease in supply decreases the quantity. Figure 4.14(b) shows the effects of a decrease in demand and an increase in supply. A decrease in demand shifts the demand curve leftward, and an increase in supply shifts the supply curve rightward.

Detailed explanation-5: -When supply decreases, the price of the good increases. Inversely, when the supply of the good increases, the price falls. A similar relationship exists between price and demand. When the demand for the good increases, the price of the good also increases.