Cause for the simultaneous rise in the price and quantity in the economy.
Explanation of Solution
The
When the demand increases, the economy would face a temporary shortage of goods and services, which will increase the general price level in the economy. The increased demand and price influence the suppliers to increase their supply in order to earn higher revenue from the market. Thus, the simplest cause for the increase in the equilibrium price and quantity will be the rightward shift in the demand curve in the economy.
Market equilibrium: Market equilibrium is obtained at the point where the market demand equals with the market supply in the economy. There will be no excess or shortage in the economy when the economy is in its equilibrium.
Want to see more full solutions like this?
Chapter 5 Solutions
Microeconomics
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage LearningEconomics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub Co