- an increase in the number of producers.
- a decrease in the costs of production (such as higher prices for oil, labor, or other factors of production).
- weather (e.g., ideal weather may increase agricultural production)
- technology (Technological innovations typically increase supply.)
- expectations (e.g., producers might increase current production if they anticipate less favorable market conditions in the future.)
- an increase in the number of consumers.
- an increase in income (for normal products) or a decrease in income (for inferior products, such as Ramen noodles).
- an increase in the price of a substitute product.
- a decrease in the price of a complementary product.
- a change in tastes and preferences (e.g., if the product has become more popular or fashionable)
- expectations (e.g., consumers might increase current demand if they anticipate less favorable market conditions, such as shortages or higher prices, in the future.)
Supply has increased. (The supply curve shifted to the right.)
Demand has increased. (The demand curve shifted to the right.)
The quantity supplied increased to the new equilibrium quantity.
The quantity demanded increased to the new equilibrium quantity.
The equilibrium price may increase, decrease, or stay the same depending on the magnitude of the shifts of supply and demand.
An increase in supply typically causes a decrease in the equilibrium price and an increase in the equilibrium quantity.
An increase in demand typically causes an increase in the equilibrium price and an increase in the equilibrium quantity.
Thus, the increases and supply and demand are both contributing to the increase in the equilibrium quantity. The increase in supply is putting downward pressure on the equilibrium price. The increase in demand is putting upward pressure on the equilibrium price. Since the supply shift and demand shift are trying to push the equilibrium price in opposite directions, the overall effect on the equilibrium price will depend on which effect is larger. The new equilibrium price could stay the same, increase or decrease:
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AN INCREASE IN SUPPLY & DEMAND WHERE PRICE IS UNCHANGED.
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AN INCREASE IN SUPPLY & DEMAND WHERE PRICE INCREASES
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AN INCREASE IN SUPPLY & DEMAND WHERE PRICE DECREASES
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ReplyDeleteWhat cause the decrease in demand and increase in supply
ReplyDeletethe decrease in demand is caused by the price dropping, so if the price drops then the supply rises because the number of consumers ... hope this answered your question :)
DeleteWhat causes the exchange rate to be flexible?
ReplyDeletewill an increase in demand be caused by an increase in the usage of the product?
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