Question
Under what condition increase in demand would not make any effect $N$ on equilibrium price?
✓
Answer
Case I: When supply also increase at the same rate as the demand increases: In the given diagram price is measured on vertical axis and quantity demanded and supplied is measured on horizontal axis. Initially, the equilibrium price is $OP$ and equilibrium quantity is $OQ$. But when "demand and supply both increase at the same rate" then,
Case II: When supply becomes perfectly elastic: In the given diagram price is measured on vertical axis and quantity demanded and supplied is measured on horizontal axis. Initially, the equilibrium price is $OP$ and equilibrium quantity is $OQ$. But when "supply becomes perfectly elastic and demand increases then.
- Equilibrium price remains constant at $OP$.
- Equilibrium quantity rises from $OQ$ to $OQ_1$.
Case II: When supply becomes perfectly elastic: In the given diagram price is measured on vertical axis and quantity demanded and supplied is measured on horizontal axis. Initially, the equilibrium price is $OP$ and equilibrium quantity is $OQ$. But when "supply becomes perfectly elastic and demand increases then.
- Equilibrium price remains constant at $OP$.
- Equilibrium quantity rises from $OQ$ to $OQ_1$.
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