2. \"Name\" and describe the effects on Price (P) and Quantity (Q) of \"two\" ma

Question

2. "Name" and describe the effects on Price (P) and Quantity (Q) of "two" market shifters (or determinants) for each of the 4 panels (a, b, c and d) below. Panel (a) An increase in demand Panel (b) A decrease in demand $9 59 o 10 15 20 25 30 35 40 45 Quantity (millions of pounds per month) Panel (c) 0 5 10 15 20 25 30 35 40 45 Quantity (millions of pounds per month) Panel (d) A decrease in supply An increase in supply $9 59 o 10 15 20 25 30 35 40 45 Quantity (millions of pounds per month) o 10 15 20 25 30 3s 40 45 Quantity (millions of pounds per month)

Explanation / Answer

2.

As it can be seen in the diagram panel a, that there is a rightward shift of the demand curve from D1 to D2. As a result

Equilibrium price increase from 6 to 7 and equilibrium quantity demand increase from 25 unit to 30 unit.

Panel b

In this there is a leftward shift of demand curve from D1 to D2, as a result the equilibrium price decrease from $6 to $5 and equilibrium quantity decrease from 25 unit to 20 unit.

Panel c

As it can be seen that, there is a rightward shift of Supply curve from S1 to D2, as a result, the equilibrium price decrease from 6 to 5 and equilibrium quantity increase from 25 unit to 30 unit.

Panel d

As it can be seen that, there is a leftward shift of the supply curve from S1 to S2, hence the equilibrium price increase from 6 to 7 and equilibrium quantity decrease from 25 to 20 unit.

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