4. Suppose the supply of apples sharply increases because of perfect weather conditions throughout the growing season. Assuming no change in demand, explain the effect on the equilibrium price and quantity of apples. Explain why the quantity demanded increases even though demand does not change.

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18-01-2021
Business

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4. Suppose the supply of apples sharply increases because of perfect weather conditions throughout the growing season. Assuming no change in demand, explain the effect on the equilibrium price and quantity of apples. Explain why the quantity demanded increases even though demand does not change.

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Palky Palky · Answer 1 · 2021-01-22T09:17:07+01:00

Answer:

Apples supply increase imply new equilibrium at lower price, higher quantity. Demand downwards expansion on the curve itself is due to lower price.

Explanation:

Market is at equilibrium where Market Demand = Market Supply, & downward sloping demand curve intersects upward sloping demand curve.

If supply of apples increase & supply curve shifts rightwards, there is Excess Supply at previous equilibrium. Excess Supply creates competition among sellers, reduces new market price.

At lower price, demand expands & supply contratcs. New Equilibrium quantity is higher where new (rightwards shifted) supply curve intersects demand curve.

Quantity demanded increases (expands - downwards movement on demand curve) due to lower price, despite of no change in demand.

PiaDeveau PiaDeveau · Answer 2 · 2021-12-10T16:22:46+01:00

Increased apple supply implies a new equilibrium of lower price and increased quantity. The supply curve's downwards growth is attributable to reduced prices.

Global market equals available supply, and the downward sloping arc meets an upwards sloping demand curve.

There is Excess Quantity at the prior equilibrium if the production of apples increases and the supply curve changes rightwards. Excess supply encourages sellers to compete, lowering the new market price.

Notwithstanding no change in the market, the quantity demanded increases due to a reduced price.

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