[go: up one dir, main page]
Scribd
Upload
187 views3 pages

Chapter 10 Price Changes

An increase in demand leads to higher prices as supply tries to meet demand, reaching a new equilibrium price. A decrease in demand lowers prices as supply exceeds demand, until a new equilibrium is found. An increase in supply initially causes surplus and lower prices, expanding demand, while a decrease in supply creates shortage and higher prices, contracting demand. In all cases, equilibrium is restored at a new price point where demand and supply are equal once more.

Uploaded by

Dhrisha Gada
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
187 views3 pages

Chapter 10 Price Changes

An increase in demand leads to higher prices as supply tries to meet demand, reaching a new equilibrium price. A decrease in demand lowers prices as supply exceeds demand, until a new equilibrium is found. An increase in supply initially causes surplus and lower prices, expanding demand, while a decrease in supply creates shortage and higher prices, contracting demand. In all cases, equilibrium is restored at a new price point where demand and supply are equal once more.

Uploaded by

Dhrisha Gada
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

Chapter - 9: Price Changes

What is the effect of an increase in demand?


● Increased demand leads to shortage of supply causing prices to move upwards
● The higher price encourages an extension in supply until a new equilibrium price of P2 is
reached
● At the price, demand and supply are equal again

What is the effect of a decrease in demand?


● Decreased demand leads to surplus of supply causing prices to move downwards
● The lower price encourages a contraction in supply until a new equilibrium price of P2 is
reached
● At the price, demand and supply are equal again

1 | Page
What is the effect of an increase in supply?
● Initially, an increase in supply will cause a surplus
● This surplus brings down the price and results in an extension in demand

2 | Page
What is the effect of a decrease in supply?
● A decrease in supply causes a shortage
● Therefore, prices rise which causes a contraction in the demand

3 | Page

You might also like