Uh-Oh! That’s all you get for now.
We would love to personalise your learning journey. Sign Up to explore more.
Sign Up or Login
Skip for now
Uh-Oh! That’s all you get for now.
We would love to personalise your learning journey. Sign Up to explore more.
Sign Up or Login
Skip for now
Solution
An increase in the income of the buyers of a normal commodity will cause an
increase in the demand for the normal commodity. As a result, the demand curve of the commodity will shift to the right. The equilibrium price and equilibrium quantity both increase.
In this diagram, the original demand curve DD and the original supply curve SS intersect at point E and determine equilibrium price equal to
OP0 and equilibrium quantity
OQ0, Now due to an increase in demand, demand curve shifts to the right, i.e., DD to
D1D1.
The new demand curve D1D1 intersects the given supply curve SS at point E1 where new
equilibrium price is OP1 and new equilibrium quantity is
OQ1.
How is the equilibrium price and equilibrium quantity of a commodity affected when increase is demand is more than increase in supply explain with the help of a diagram?
At a higher price quantity demanded will fall and quantity supplied will increase resulting in upward movement along new demand curve and given supply curve. This reduces the gap between quantity demanded and quantity supplied.
How is the equilibrium price and equilibrium quantity of a commodity affected by a rise in the prices of its substitutes explain with diagram?
1 Answer. A rise in price of substitues leads to an increase in the demand for the commodity. Hence, the demand curve will shift rightwards. With this increase in demand and supply being the same, equilibrium price will rise with an increase in competition among buyers.
How is the equilibrium price of a commodity affected by an increase in the supply of the commodity?
When supply of a commodity increases and its demand remains the same, equilibrium price will decrease and equilibrium quantity demanded and supplied will increase. equilibrium price will increase but equilibrium quantity demanded and supplied will decrease.
How does the equilibrium price of a normal commodity change when income of buyers falls explain the chain effects?
For a normal commodity, decrease in income of the buyers means decrease in its demand. Accordingly, demand curve shifts leftward and both equilibrium price and equilibrium quantity tend to decrease.