Answer to Question #89671 in Microeconomics for Monga

Question

Question 5 (Marks: 30)

Describe a scenario (real-life or fictitious) that reflects each of the following cases (Q.5.1-Q.5.3).
Thereafter, graphically illustrate and explain each scenario in each case clearly showing the impact
of the change on the equilibrium price and the equilibrium quantity of your chosen good.
(In cases where you simultaneously change demand and supply, assume that they change by the
same magnitude).
Note: Knowledge and understanding of the determinants of demand and supply are critical in
answering these questions.

Q.5.1 An increase in demand (while supply remains constant).
(Two marks will be awarded for your scenario, four marks for your graph and
four marks for your explanation).
(10)

Answer 1

5.1 An increase in demand (while supply remains constant) will occur as a result of change in preferences and as a result willingness to buy the particular good, for example apples, if some research states that they are wery useful for health. So, both the equilibrium price and the equilibrium quantity will increase.