Figure 14-9

-Refer to Figure 14-9.Assume that the market starts in equilibrium at point A in panel (b).What will result from an increase in demand from Demand0 to DemanD₁

Question

Figure 14-9
 
-Refer to Figure 14-9.Assume that the market starts in equilibrium at point A in panel (b).What will result from an increase in demand from Demand0 to DemanD₁

Quizplus · Accepted Answer

An increase in demand will initially raise prices and profits, attracting new firms to the market. This will eventually lead to a new long-run equilibrium at point C, where the number of firms has increased.

Figure 14-9 -Refer to Figure 14-9.Assume That the Market Starts in Equilibrium