Q14 of 25 Page 84

Compare the effect of shift in demand curve on the equilibrium when the number of firms in the market is fixed with the situation when entry-exit is permitted.

Tea and coffee are substitute to each other so the change in price of coffee will have a direct impact on the demand for tea. Increase in price of coffee will increase the demand for tea and decrease in the price of coffee will decrease the demand of tea.


More from this chapter

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12

How do the equilibrium price and quantity of a commodity change when price of input used in its production changes?

 13

If the price of a substitute(Y) of good X increases, what impact does it have on the equilibrium price and quantity of good X?

 15

Explain through a diagram the effect of a rightward shift of both the demand and supply curves on equilibrium price and quantity.

 6

How are the equilibrium price and quantity affected when –

(a) Both demand and supply curves shift in the same direction?


(b) Demand and supply curves shift in opposite directions?