Assignment 1 Module 1 A What is the effect on equilibrium pr

Assignment #1 (Module 1) A. What is the effect on equilibrium price and quantity of the following: Instruction - Starting from equlilbrium, just state whether equilibrium price and quantity wit go up, go down, or remain unchanged) t. A decrease in demand that is greater than the increase in supply 2. An increase in supply 3. A decrease in supply that is greater than the increase in demand 4. A decrease in demand B. What effect will each of the following have on the supply ofprodu

Solution

When demand is the increased price is increased that is there is a direct relation between demand and price. when supply is the increased price is decreased that is there is an inverse relationship between price and supply.

1) A decrease in demand leads to decrease in prices and decrease in quantity. An increase in supply leads to decrease in price and increase in quantity. As the decrease in demand is more than the increase in supply so the price will be gone down and quantity will go down.

2) An increase in supply leads to decrease in prices and increase in quantity that is price go down and quantity go up.

3) A decrease in supply leads to increase in prices and decrease in quantity. An increase in demand leads to increase in prices and increase in quantity. A decrease in supply is greater so the price will be increased and quantity will be decreased. Price goes up and quantity goes down.

4) A decrease in demand results in a decrease in prices and decrease in quantity. Price and quantity both will go down.