Question

Using a diagram, show the situation when the equilibrium quantity changes but the equilibrium price remains same as a result of change in demand.

Answer 1

1. The supply curve (S) is perfectly elastic a horizontal line indicating that supply is available at a constant price.
2. The initial demand curve (D₁D₁) intersects supply at point A, setting the initial equilibrium at:
   • Price = OP₀
   • Quantity = OQ₀

3. When demand increases, the curve shifts rightward to D₂D₂.

   • The new intersection point is B
   • New quantity = OQ₁
   • Price remains unchanged at OP₀