Question

If some sellers exit a competitive market, how will this affect its equillibrium? Using the 3-point drawing tool, show the impact if some sellers enter a competitive market. Label your new curve appropriately. Using the point drawing tool, show the new equilibrium price and quantity. Label this point 'A'. Carefully follow the instructions above and only draw the required objects. According to your graph, when some sellers enter a competitive market, the equilibrium price_________ and the equilibrium quantity________.

Answer 1

Answer:

when some sellers exit a competitive market, the equilibrium price increases and the equilibrium quantity decreases.

Explanation:

Be D=Demand function, S=Supply function, Q=Quantity, P=Price.

In principle, we have that the market is in balance between supply (S1) and demand. This equilibrium point is seen in the graph as E1. Once sellers leave the market, this reduces the supply, which can be seen in the graph as a new line representing the new supply function (S2). This new function generates a new intersection with the demand function, from which we obtain a new equilibrium point E2.

when some sellers exit a competitive market, the equilibrium price increases and the equilibrium quantity decreases.