In the graph, supply rises from S to S₁ while demand stays at D. What happens to the equilibrium? Demand D (Qd = 100 − 10P) with two supply curves: S (Qs = 10P − 20) and S₁ (Qs = 10P), further right. Equilibrium moves from E (₹6, 40 units) to E₁ (₹5, 50 units).

In the graph, supply rises from S to S₁…

In the graph, supply rises from S to S₁ while demand stays at D.

Question 25

MediumOriginal question

In the graph, supply rises from S to S₁ while demand stays at D. What happens to the equilibrium?

Demand D (Qd = 100 − 10P) with two supply curves: S (Qs = 10P − 20) and S₁ (Qs = 10P), further right. Equilibrium moves from E (₹6, 40 units) to E₁ (₹5, 50 units).

Price rises from ₹6 to ₹7 and quantity rises to 50Correct answerYour answerPrice and quantity both fallCorrect answerYour answerPrice falls but quantity stays at 40Correct answerYour answerPrice falls from ₹6 to ₹5 and quantity rises from 40 to 50Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer D

Correct answer: D

New equilibrium: 100 − 10P = 10P, so P = ₹5 and Q = 50.
An increase in supply, with demand unchanged, lowers price and raises quantity.

Concept: Increase in supply
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, supply rises from S to S₁ while demand stays at D.

Question 25

Explanation