For each supply and demand scenarios below, answering the following questions:
How will each affect equilibrium price and equilibrium quantity in a competitive market?
Will price and quantity rise, fall, or be unchanged?
Based on the magnitudes of the shifts, will the answers be indeterminate?
Provide an appropriate graph to illustrate each answer (this does not require use of Excel, although you may use it).
Demand decreases and supply is constant (unchanged).
Demand increases and supply increases.
Supply decreases and demand is constant (unchanged).
Supply increases and demand decreases.
Demand increases and supply decreases.
Demand decreases and supply decreases.
Demand increases and supply is constant (unchanged).
Note that ‘constant’ means with no shift while ‘increases’ or ‘decreases’ means a shift occurs.
For u01a1, Problem 1, note that phrasing such as "Demand decreases and supply is constant." (as in question 1) indicates that demand shifts to the left/down ('decreases') and supply remains unchanged. The words 'increase' and 'decrease' refer to shifts in the demand or supply. 'Constant' simply indicates no shift.
Note that the magnitude of the shift in some cases will determine whether the price (or quantity) rises, falls, or remains unchanged. This is what is meant by ''indeterminate'.