Page 8 - Home Assignment-Price determination
P. 8
Y
D
Pri
S
ce
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P E
|
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X
O Q Quantity demanded
and quantity supplied
In the above diagram it is observed that with the increase and decrease in supply
the equilibrium quantity remains constant at OQ but the equilibrium price
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decreases and increases to and respectively.
Case: -3 When the supply curve is a horizontal straight line parallel to OX-
axis then a change in demand will not affect the equilibrium price
but the equilibrium quantity directly varies with the change in
demand.
Case: -4 When the supply curve is a vertical straight line parallel to OY-axis
then a change in demand will not affect the equilibrium quantity
but the equilibrium price directly varies with the change in
demand.
