1.2.3 markets

Question 1

equilibrium (def.)

Answer 1

a state of equality/balance between market demand and market supply

Question 2

what does a rise in demand cause?

Answer 2

original equilibrium = p1 and q1

rise in demand = demand curve shifts right from d1 to d2

at p1 : there is now a shortage of demand

a new equilibrium develops at p2 and q2

Question 3

what does a fall in demand cause?

Answer 3

original equilibrium = p1 and q1

fall in demand = demand curve shifts to the left from d1 to d2

at p1 : there is now a surplus of supply

surplus causes prices to fall from p1 to p2

a new equilibrium forms at p2 and q2

Question 4

what does a rise in supply cause?

Answer 4

original equilibrium = p1 and q2

rise in supply = supply curve shifts to the right from s1 to s2

at p1 : there is now a surplus of supply

prices fall from p1 to p2

a new equilibrium forms at p2 and q2

Question 5

what does a fall in supply cause?

Answer 5

original equilibrium = p1 and q2

fall in supply = supply curve to shift to the left from s1 to s2

at p1 : there is now a shortage of supply

prices rise from p1 to p2

new equilibrium forms at p2 and q2