University:
Indiana University South Bend
Course:
BUS-A 201 | Introduction to Financial Accounting
Academic year:

2023
Views:

360

Pages:

1
Author:

Rose G

SUPPLY & DIMAND microeconomics. Assume (hat a competitive market is in equilibrium. what happens to the equilibrium when (show graphically and explain briefly) Increase in the price of a substitute good If the price of good A increases, the supply curre shifts left resulting in a higher price for less quantity demanded. This leads to an increase in the demand of good 3, which shifts the demand curve right. The new equilibriun for good A is now at and for good B Is now at . Decrease in marginal cost Marginal cost is the change in total cost that arises when the quantity produced is incremented by one unit. If marginal cost decrease, thal means more quantity can be produced for the same price there for shifting the supply curve right. A new equilibrium clears at point B. Increase in the price of a complement good If the price of good A increases, the supply curve shifts left resulting in a highes price for less quantity demanded. This leads to a decrease in the demand of good B. The demand curve therefor shifts left. The new equilibriums are now at and D.