An increase in the demand for good A will increase the equilibrium quantity of good A and leave the equilibrium price unchanged if
there is sufficient supply to meet the increased demand.
An increase in the demand for good A will increase the equilibrium quantity of good A and leave the equilibrium price unchanged if the supply of good A is perfectly elastic.
An increase in the demand for good A will increase the equilibrium quantity of good A and leave the equilibrium price unchanged if the supply of good A is perfectly elastic.
To understand why this is the case, let's break it down step by step:
1. Demand Curve: The demand curve represents the relationship between the quantity of a good that consumers are willing and able to buy at different prices. When the demand for good A increases, the demand curve shifts to the right, indicating that consumers are now willing to buy more of good A at each price level.
2. Supply Curve: The supply curve represents the relationship between the quantity of a good that producers are willing and able to sell at different prices. In this scenario, for the equilibrium price to remain unchanged, the supply curve must also shift to the right by the same amount as the demand curve.
3. Equilibrium Point: The equilibrium point is where the demand and supply curves intersect, determining the equilibrium price and quantity. When both the demand and supply curves shift to the right, the new equilibrium point will occur at a higher quantity, bringing the quantity closer to the new level of demand. However, for the equilibrium price to remain unchanged, both curves must shift by the same amount.
4. Perfectly Elastic Supply: If the supply of good A is perfectly elastic, it means that producers can instantly and infinitely increase the quantity supplied at the existing price. This implies that producers are willing to supply any amount of good A at the current price without any constraints.
5. Impact on Equilibrium: When the demand for good A increases, the increase in quantity demanded can be fully accommodated by the perfectly elastic supply. As a result, the equilibrium quantity of good A increases without any change in the equilibrium price. This is because the increase in demand can be met by a corresponding increase in supply without putting upward pressure on the price.
So, to summarize, an increase in the demand for good A will increase the equilibrium quantity of good A and leave the equilibrium price unchanged if the supply of good A is perfectly elastic, enabling producers to meet the increased demand without adjusting the price.