3 Answers | Add Yours
This will depend on whether the supply and the demand rise at the same rate or whether one or the other rises more quickly.
If supply rises faster than demand, the equilibrium price of the good will go down. The supply curve will move to the right a given amount. The demand curve will also move to the right, but not as much. This will lead to a lower equilibrium price than before.
If demand rises faster than supply, the opposite of the above will be true. Both curves still move to the right, but the demand curve moves more and therefore the price rises.
So this really depends on the degree to which each of the two curves on your graph moves.
supply and demand is the fundamental concept of economics.When supply and demand are equal the economy is said to be at equilibrium. At this point, the allocation of goods is at its most efficient because the amount of goods being supplied is exactly the same as the amount of goods being demanded. Thus, everyone is satisfied with the current economic condition. At the given price, suppliers are selling all the goods that they have produced and consumers are getting all the goods that they are demanding.
Price is derived by the interaction of supply and demand. The resultant market price is dependant upon both of these fundamental components of a market. An exchange of goods or services will occur whenever buyers and sellers can agree on a price. When an exchange occurs, the agreed upon price is called the "equilibrium price", or a "market clearing price" .
When either demand or supply changes, the equilibrium price will change. For example, good weather normally increases the supply of grains and oilseeds, with more product being made available over a range of prices. With no increase in the quantity of product demanded, there will be movement along the demand curve to a new equilibrium price in order to clear the excess supplies off the market. Consumers will buy more but only at a lower price.
We’ve answered 319,426 questions. We can answer yours, too.Ask a question