The graph shown depicts the market for a good. Assume the market was originally in equilibrium where the demand curve (D) and supply curve (S) intersect. Something changes in the market, and the demand curve for the good shifts to D₂. Which of the following is true? A) The equilibrium price will increase by $5. B) The equilibrium quantity will increase by 20 units. C) The equilibrium price will increase by $15. D) The equilibrium quantity will increase by 30 units.

Question

Quizplus · Accepted Answer

When the demand curve shifts from D to D₂, the equilibrium price will increase as the demand for the good has increased. However, the effect on equilibrium quantity is uncertain as it depends on the relative size of the demand and supply shifts. Therefore, options B and D can be ruled out. Option C suggests a large increase in equilibrium price which is unlikely to happen with a small shift in the demand curve. Therefore, the best choice is A - the equilibrium price will increase by $5.

The Graph Shown Depicts the Market for a Good