Increase in demand - effect on equilibrium price, Managerial Economics

Increase in demand

1684_increase in demand.png

SS is the supply curve and D1D1 the initial demand curve shifts to the right, to position D2D2.  P1 is the initial equilibrium price and q1 the initial equilibrium quantity.  When demand increases to D2D2, then at price P1, the quantity demanded increases from q1 to qd.  But the quantity supplied at that price is still q1.  This leads to excess demand over supply (qd - q1).  This causes prices to rise to a new equilibrium level P2 and the quantity supplied to rise to a new equilibrium level, q2.

Posted Date: 11/27/2012 6:16:25 AM | Location : United States

Related Discussions:- Increase in demand - effect on equilibrium price, Assignment Help, Ask Question on Increase in demand - effect on equilibrium price, Get Answer, Expert's Help, Increase in demand - effect on equilibrium price Discussions

Write discussion on Increase in demand - effect on equilibrium price
Your posts are moderated
Related Questions
If the marginal product of L is MPL = 10K - L and the marginal product of K is MPK = 10L - K, then what is the maximum possible output when the total amount that can be spent on K

State the difficulties in the measurement of profit.

Suppose that Betsy's utility function is given by the equation U=Y0.3 where Y is calculated in thousands of dollars. Betsy's present job pays her $20,000 (Y=20) per year and she ca

A risk-neutral agent's working life has two periods. In each period, the agent can provide high effort (at personal cost $2,000) or low effort (at zero personal cost). In a given p

Measurement of Inflation The rate of inflation is measured using the Retail Price Index.  A retail Price Index aims to measure the change in the average price of a basket of g

What is the difference between a movement along a demand or supply curve and a shift of one of these curves? Why is it important to distinguish between the two? What mistake migh

Price Elasticity of Demand and the slope of the Demand Curve Elasticity determines the shape of the demand curve. From the formulas

what is the goal of firm

SHORT-RUN EQUILIBRIUM All firms are assumed to aim at maximizing profits or minimizing losses.  The monopolist controls his output or price, but not both. The monopoly maxi

Paper Money Due to the risk of theft, members of the public who owned such metal money would deposit them for safe keeping with goldsmiths and other reliable merchants who