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| Topic: |
Business
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| Number of pages / Number of words: |
5 / 1143 |
Essay's paper body
This shortage will cause the price to be bid upwards and supply to extend until a new equilibrium price is established at P’. The quantity demanded and supplied is now Q’.
Figure I I .5 shows a decrease in demand. The demand curve shifts to the Left (D ).There is a surplus at price P (equal to the horizontal distance between the demand curves)...
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The demand curve shifts to the Left (D ).There is a surplus at price P (equal to the horizontal distance between the demand curves). Suppliers will be obliged to lower prices to Pi in order to clear their stocks. This fall in price will cause a contraction in supply.
THE EFFECTS OF SHIFTS IN SUPPLY:-
The effects of changes in supply may also be summarized in the form of two economic predictions:
- in the short run, other things being equal, an increase in supply will lower the price and this in turn will cause an extension in demand:
- in the short run, other things being equal, a decrease in supply will arise the price and cause a contraction n demand...
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