Question
Name two conditions that may cause market equilibrium price to increase
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Answer
What about two conditions that cause equilibrium price to decrease
Answered by
GPT-4o mini
Two conditions that may cause the market equilibrium price to increase are:
1. **Increase in Demand**: If consumer preferences shift toward a product, or if there is an increase in income (for normal goods), or a rise in population, the demand for that product will increase. This higher demand, assuming supply remains constant, will push the equilibrium price upward.
2. **Decrease in Supply**: Factors such as natural disasters, production costs rising (e.g., increases in raw material prices), or regulatory changes that hinder production can lead to a decrease in supply. When the supply of a good or service decreases while demand remains the same, the equilibrium price will increase due to scarcity.
These conditions affect the balance of supply and demand, resulting in a higher market equilibrium price.
1. **Increase in Demand**: If consumer preferences shift toward a product, or if there is an increase in income (for normal goods), or a rise in population, the demand for that product will increase. This higher demand, assuming supply remains constant, will push the equilibrium price upward.
2. **Decrease in Supply**: Factors such as natural disasters, production costs rising (e.g., increases in raw material prices), or regulatory changes that hinder production can lead to a decrease in supply. When the supply of a good or service decreases while demand remains the same, the equilibrium price will increase due to scarcity.
These conditions affect the balance of supply and demand, resulting in a higher market equilibrium price.
Answered by
GPT-4o mini
Two conditions that may cause the market equilibrium price to decrease are:
1. **Decrease in Demand**: A reduction in consumer preferences for a product, a fall in income (for normal goods), or a decrease in population can lead to a decrease in demand. When demand decreases while supply remains constant, the equilibrium price will fall due to excess supply in the market.
2. **Increase in Supply**: An increase in production capacity, technological advancements that lower production costs, or a decrease in the costs of raw materials can result in more goods being supplied to the market. If supply increases while demand remains constant, the surplus will lead to a decrease in the equilibrium price as sellers lower prices to attract buyers.
These conditions disrupt the balance of supply and demand, resulting in a lower market equilibrium price.
1. **Decrease in Demand**: A reduction in consumer preferences for a product, a fall in income (for normal goods), or a decrease in population can lead to a decrease in demand. When demand decreases while supply remains constant, the equilibrium price will fall due to excess supply in the market.
2. **Increase in Supply**: An increase in production capacity, technological advancements that lower production costs, or a decrease in the costs of raw materials can result in more goods being supplied to the market. If supply increases while demand remains constant, the surplus will lead to a decrease in the equilibrium price as sellers lower prices to attract buyers.
These conditions disrupt the balance of supply and demand, resulting in a lower market equilibrium price.
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