In the graph, demand rises from D to D₁ while supply stays at S. What happens to the equilibrium? Supply S (Qs = 10P − 20) with two demand curves: D (Qd = 100 − 10P) and D₁ (Qd = 120 − 10P), further right. Equilibrium moves from E (₹6, 40 units) to E₁ (₹7, 50 units).

In the graph, demand rises from D to D₁…

In the graph, demand rises from D to D₁ while supply stays at S.

Question 24

MediumOriginal question

In the graph, demand rises from D to D₁ while supply stays at S. What happens to the equilibrium?

Supply S (Qs = 10P − 20) with two demand curves: D (Qd = 100 − 10P) and D₁ (Qd = 120 − 10P), further right. Equilibrium moves from E (₹6, 40 units) to E₁ (₹7, 50 units).

Price rises from ₹6 to ₹7 and quantity from 40 to 50Correct answerYour answerPrice falls from ₹6 to ₹5 and quantity rises to 50Correct answerYour answerPrice rises but quantity fallsCorrect answerYour answerNothing changesCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

New equilibrium: 120 − 10P = 10P − 20, so P = ₹7 and Q = 50.
An increase in demand, with supply unchanged, raises both price and quantity.

Concept: Increase in demand
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsWhen demand or supply shifts

Practise this chapter →

Ten questions from Market Equilibrium & Price Controls, at your own pace.

Practise this chapter →

Ten questions from Market Equilibrium & Price Controls, at your own pace.

In the graph, demand rises from D to D₁ while supply stays at S.

Question 24

Explanation