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Homework answers / question archive / How demand and supply will work if there is a change in the market equilibrium? Will the demand change (i
How demand and supply will work if there is a change in the market equilibrium? Will the demand change (i.e., demand curve), or supply? Why? What variables will lead to those changes?
The increase in demand affects prices and quantity supplied to the market. For instance, let's assume an increase in disposable income due to an increase in salaries. That translates to the increased income; hence the demand for clothes will increase, consequently causing the demand curve to shift in the right for the clothes. Moreover, the quantity of the cloth needed, and the equilibrium price will increase while the supply curve will remain unchanged. The excess increase in demand will lead to an increase in price hence increased supply. An increase in demand leads to a movement along the supply curve.
Several variables lead to the shift in the demand curve and include a change in population composition, changes in tastes, change in the income, and change in prices of related goods.