Question

Suppose that inalater market period,the quantities

supplied in the table in Problem 3-1 are unchanged.

The amount demanded,however,has increased by 30

million at each price.Construct the resulting demand

curve in the illustration you made for Problem 3-1.Is

this an increase or a decrease in demand? What are

the new equilibrium quantity and the new market

price?Give two examples of changes in ceteris paribus

conditions that might cause suchachange.

Short answer

Increase in demand.

Equilibrium quantity and price now: 100 million and $360

Step-by-step solution

Given information

Demand at each price level has increased by 30 millions. Supply is unchanged.

Step2. a) Explanation

New demand curve:

The new demand corresponding to prices 330, 340, 350... is 130, 120, 110, 100... (in millions).

Quantity supplied remains unchanged as previous question, hence, new equilibrium is corresponding to $360 and 100 million quantity.

Step3. b) Explanation

The demand when changes to an addition of 30 millions at each price level is referred to as the increase in demand.

This can be caused due to: increase in income, positive change in taste and preferences.