Question

With the help of a diagram, show how the equilibrium price can remain unchanged even after a rightward shift of the demand curve.

Answer 1

A rightward shift in the demand curve, given the supply curve, the equilibrium price generally increases. However, if the supply curve is horizontal (a perfectly elastic supply of a commodity), then the equilibrium price remains unchanged even after a rightward shift of the demand curve.

The demand curve shifts from D₀D₀ to D₁D₁ but the equilibrium price is OP₀.