Business – 3.1 The nature of marketing – Demand and supply | e-Consult
3.1 The nature of marketing – Demand and supply (1 questions)
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Answer:
- A shift in the demand curve occurs when, at every price, the quantity demanded changes due to factors other than price (e.g., income, tastes, expectations).
- If demand increases (shifts right) and supply stays the same, the new equilibrium is found where the new demand curve meets the original supply curve. The equilibrium price rises because the higher demand creates excess demand at the original price, pushing price up. The equilibrium quantity also rises because the higher price encourages more supply and the greater demand leads to more units being bought.
- On a diagram the original equilibrium is at the intersection of D₁ and S. The new demand curve D₂ lies to the right of D₁. The movement from the old to the new equilibrium is upward along the supply curve and to the right, indicating higher price and higher quantity.