Question
How does a favourable change in the taste for a commodity affect market price and quantity exchanged for the commodity? Use diagram.
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Answer
A favourable change in taste for a commodity (say jeans) will cause an increase in the demand for a commodity (jeans). As a result, the demand curve of the commodity will shift to the right. The supply curve of the commodity remaining the same, this will lead to a rise in the market price of the commodity and increase in quantity exchanged.
It is clear from the diagram that as a result of increase in demand, the demand curve $DD$ shifts rightwards to $D_1D_1$. As a result, the price rises from $OP$ to $OP_1$ and quantity exchanged rises from $OQ$ to $OQ_1$.
It is clear from the diagram that as a result of increase in demand, the demand curve $DD$ shifts rightwards to $D_1D_1$. As a result, the price rises from $OP$ to $OP_1$ and quantity exchanged rises from $OQ$ to $OQ_1$.
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