Economic Demand and Supply Anaylsis

a. demand increases and supply increases

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Diagram 1 Diagram 2

Diagram 3

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The 3 possible outcomes which can be form when both demand and supple increases firstly based on the diagram 1, it can be observed that the equilibrium price will drop from P to P1 while equilibrium quantity will increase from Q to Q1. In diagram 2 both the equilibrium price and equilibrium quantity will increase from P to P1 and Q to Q1. Lastly in diagram 3, the equilibrium price will remain at P while equilibrium quantity increases from Q to Q1. In conclusion, equilibrium price is indeterminate while equilibrium quantity increases

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b. demand increases and supply decreases

Diagram 4 Diagram 5

Diagram 6

There are 3 possible outcomes which can be observed when an increase in demand and a decrease in supply. Firstly, from diagram 4 the equilibrium price will increase from P to P1 while the equilibrium quantity will decrease from Q to Q1. In diagram 5, the equilibrium price again rises from P to P1 while there is no change in the equilibrium quantity. Lastly, in diagram 6 both equilibrium price and equilibrium quantity rises from P to P1 and Q to Q. In conclusion, equilibrium price rises while equilibrium quantity is indeterminate.

c. demand decreases and supply decreases

Diagram 7 Diagram 8

Diagram 9

Based on the diagrams above, when both demand and supply decreases 3 outcomes are form, firstly the equilibrium price rises from P to P1 while the equilibrium quantity drops from Q to Q1. The next outcome is that both the equilibrium price and equilibrium quantity falls from P to P1and Q to Q1. Lastly, the equilibrium price remains at P but the equilibrium quantity drops from Q to Q1. In conclusion, equilibrium price is indeterminate while equilibrium quantity falls.

d. demand decreases and supply increases

Diagram 10 Diagram 11

Diagram 12

When the demand decrease...