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What happens to the equilibrium price when market demand increases?
- a)The equilibrium price decreases.
- b)The equilibrium price remains unchanged.
- c)The equilibrium price increases.
- d)The equilibrium price becomes unpredictable.
Correct answer is option 'C'. Can you explain this answer?
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What happens to the equilibrium price when market demand increases?a)T...
Effect of Market Demand Increase on Equilibrium Price:
Increased market demand has a direct impact on the equilibrium price in a market. When market demand increases, it means that consumers are willing to buy more of a product at every price point. This creates a situation where the demand curve shifts to the right, intersecting with the supply curve at a higher price level.
Explanation:
- Shift in Demand Curve: When market demand increases, the demand curve shifts to the right, indicating that consumers are willing to buy more of the product at each price level.
- Intersection of Demand and Supply: The new demand curve intersects with the supply curve at a higher price point. This is because suppliers are now selling more of the product at a higher price due to increased demand.
- Equilibrium Price Increase: As a result of the shift in demand and the intersection of demand and supply curves at a higher price point, the equilibrium price increases. This higher price level reflects the new balance between supply and demand in the market.
Therefore, when market demand increases, the equilibrium price in the market increases as well. This adjustment helps to allocate resources efficiently and ensures that the quantity demanded equals the quantity supplied at the new equilibrium price.
Increased market demand has a direct impact on the equilibrium price in a market. When market demand increases, it means that consumers are willing to buy more of a product at every price point. This creates a situation where the demand curve shifts to the right, intersecting with the supply curve at a higher price level.
Explanation:
- Shift in Demand Curve: When market demand increases, the demand curve shifts to the right, indicating that consumers are willing to buy more of the product at each price level.
- Intersection of Demand and Supply: The new demand curve intersects with the supply curve at a higher price point. This is because suppliers are now selling more of the product at a higher price due to increased demand.
- Equilibrium Price Increase: As a result of the shift in demand and the intersection of demand and supply curves at a higher price point, the equilibrium price increases. This higher price level reflects the new balance between supply and demand in the market.
Therefore, when market demand increases, the equilibrium price in the market increases as well. This adjustment helps to allocate resources efficiently and ensures that the quantity demanded equals the quantity supplied at the new equilibrium price.
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Community Answer
What happens to the equilibrium price when market demand increases?a)T...
When market demand increases, the equilibrium price typically increases. This occurs because higher demand puts upward pressure on prices as consumers are willing to pay more for the product. Suppliers respond to this increased demand by raising prices until a new equilibrium is reached at a higher price level.
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What happens to the equilibrium price when market demand increases?a)The equilibrium price decreases.b)The equilibrium price remains unchanged.c)The equilibrium price increases.d)The equilibrium price becomes unpredictable.Correct answer is option 'C'. Can you explain this answer?
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