market for a good is in equibrium .There is a simuntaniously 'increase' both demand and supply but there is no change in price. Explain how is it possible. Use schedule

With a simultaneous increase in both the demand and supply, it is possible that the equilibrium market price may not change. This happens under a situation where both demand and supply increase in the same proportion. In such a case, only the equilibrium quantity rises while, the equilibrium price remains unchanged.

The following schedule explains this.

Price

(Rs)

Initial Demand


 

Initial Supply


 

Final Demand


 

Final Supply


 

10

10

30

14

34

8

15

25

19

29

6

20

20

24

24

4

25

15

29

19

2

30

10

34

14

In the above schedule, initial equilibrium price is Rs 6 where both demand and supply are equal to 20 units.

Now suppose both demand and supply increase in the same proportion that is, by 4 units. Again, the equilibrium price is established at Rs 6 where both demand and supply equal at 24 units.

  • 2

 I am not able to draw a schedule over here but can xplain you...

see when both demand and supply changes price remains unchanged bcoz there is a rightward shift of equ. point at same price level...try to draw the schedule and you will understand..

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