Economics – Demand and supply curves | e-Consult
Demand and supply curves (1 questions)
Answer 1
Description and Explanation of Demand Curve Shift:
The demand curve shifts to the left. This indicates a decrease in demand at all price levels. This is caused by a change in consumer tastes, making the product less desirable. The demand curve is a reflection of consumers' willingness and ability to pay for a good or service.
Changes in Equilibrium Price and Quantity:
The shift in the demand curve leads to a new equilibrium. The new equilibrium price is lower than £10 and the new equilibrium quantity is lower than 100. This is because at any given price, consumers are now willing to buy less of the product.
Effect on Producer and Consumer Surplus:
- Consumer Surplus: Consumer surplus increases. Consumers are now paying a lower price for the good, so they benefit.
- Producer Surplus: Producer surplus decreases. Producers are receiving a lower price for the good, so their profits are reduced.
Diagrammatic Representation (not possible to include in text format, but would show a leftward shift in the demand curve and the corresponding changes in equilibrium price and quantity).