Chapter 4: Problem 1

When demand rises and supply stays the same, _____. a) equilibrium quantity rises b) equilibrium quantity declines c) equilibrium quantity stays the same

Short Answer

Expert verified

a) equilibrium quantity rises

Step by step solution

Understand the concept of equilibrium quantity

Equilibrium quantity is the amount of goods or services in a market where the quantity demanded is equal to the quantity supplied. This occurs at the intersection point of the demand and supply curves.

Examine the demand curve

The demand curve shows the relationship between the quantity demanded by consumers and the price of the good. Generally, it slopes downwards as the price goes down, the quantity demanded increases.

Examine the supply curve

The supply curve shows the relationship between the quantity of goods producers are willing and able to sell and the price at which they sell. Generally, the supply curve slopes upward as the price goes up, the quantity supplied increases.

Analyze the effect of rising demand on equilibrium quantity

When demand rises, it means that consumers are willing to buy more of the good at each price. This causes the demand curve to shift to the right. As the demand curve shifts, it intersects the supply curve (which remains unchanged) at a new point, leading to a new equilibrium point.

Determine the outcome

Since the demand curve has shifted to the right and the supply curve remains unchanged, the new equilibrium point will be at a higher level of quantity than before. Therefore, the equilibrium quantity rises. Hence, the correct answer is: a) equilibrium quantity rises.