Managerial Economicsintermediate
Match each market change with its usual effect on equilibrium, assuming the other curve does not shift.
Answer
Demand increases - Equilibrium price rises and quantity rises, Supply increases - Equilibrium price falls and quantity rises, Demand decreases - Equilibrium price falls and quantity falls, Supply decreases - Equilibrium price rises and quantity falls
Explanation
### The pairs
| Item | Matches | Why |
|---|---|---|
| Demand increases | Equilibrium price rises and quantity rises | More demand at each price moves the intersection up and to the right along the unchanged supply curve. |
| Supply increases | Equilibrium price falls and quantity rises | More supply at each price moves the intersection down and to the right along the unchanged demand curve. |
| Demand decreases | Equilibrium price falls and quantity falls | Weaker demand moves the intersection down and to the left. |
| Supply decreases | Equilibrium price rises and quantity falls | Reduced supply moves the intersection up and to the left. |
### The concept
These results assume one curve shifts while the other stays fixed. If demand and supply shift together, the final outcome depends on the direction and size of both changes and on elasticity.
### Remember
A demand shift changes price and quantity in the same direction; a supply shift changes them in opposite directions.
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