Question 1
The point of intersection gives the goods that the producer is willing to supply at the prevailing market price. It marks the point that the buyer is willing to spend on buying the goods already in the market. It is illustrated in the figure below.
In the above figure, E represents the equilibrium point, Pe is the equilibrium price, and Qe is the equilibrium quantity.
Delegate your assignment to our experts and they will do the rest.
Question 2
A decrease in consumer income means that there is a reduction in the number of goods that the consumer buys. In return, it means that the number of goods the consumer is demanding decreases. If prices of a good remain constant, changes in other factors of demand lead to a shift of the demand curves. In this case, a decrease in consumer income means that the demand curves shift downwards. The new equilibrium point is deduced by getting the point of intersection that occurs due to the shift in the demand curve. The diagram below shows the shift in demand curves and the resulting market equilibrium point.
From the above illustration, the decrease in demand is represented by D1. The new equilibrium resulting from the shift is represented by E1, which is a decrease.
Question 3
It simply means there is an increase in supply with the prevailing market price. The supply curve shifts to the right. The diagram below shows the shift in the supply curve represented by S1. The new equilibrium point is E1, which is an increase.
Question 4
If both the consumer income decreases and more firms are producing the goods, the prices decrease, and the quantity produced increases. The equilibrium prices reduce from Pe to Pe1. Quantity supplied increases from Qe to Qe1. The equilibrium point increases from E0 to E1, as illustrated in the diagram below.
