Question

What will the impact on market price and quantity exchanged when

(i) There is rightward shift in demand curve 

(ii) The demand curve is perfectly elastic and supply curve shifts rightward. 

(iii) Both the demand and supply decrease in same proportion.

Answer 1

(i) Equilibrium (market) price and quantity will increase, presuming supply to be constant. 

(ii) It will lead to decrease in price and increase in quantity transacted. 

(iii) Equilibrium price will not affected but quantity supplied and demanded will decrease in the same ratio.