The demand curve is likely to change upwards or rise as a result of changes in a number of factors. One, if there is a move up in the price of an alternative commodity, or decrease in price of the given commodity’s accompaniment. Two, if there is a rise in buyers’ income. Three, if the taste as well as preferencs of the consumers shifts in regard to the particular product or service under consideration. Four, when there is a decrease in the cost of borrowing. And finally, if there is an overall increase in the buyers’ trust accompanied with optimism for the particular product or service.
Consequently, the outward change in the demand curve gives rise to a shift also referred to as expansion, along the supply curve coupled with an increase in the equilibrium price as well as quantity. In such a case, the suppliers will increase he quantity of their supplies at that higher price, thus gain more from sales. On the other hand, the opposite effects will take place if there is an inward change of demand. It is important to note that, a movement of the demand curve does not influence any change in the supply curve. Ordinarily, demand as well as supply factors are said to be autonomous of each other, even though this assumption is subject to criticism by majority economists.
Market supply and equilibrium price
The supply curve is likely to change outwards due to the following reasons. First, if there is a reduction in the cost of production. Second, if the government intervenes by offering incentives to producers in terms of subsidies, which in one way another cut down the costs per unit offered to the market. Third, with a favorable climate that boosts production levels, especially agricultural produce. Fourth, if there is a reduction in the price of a replacement in output. Also, advancement in production technology proceeding greater output and expertness in the product procedures, hence reducing costs for firms. Again, with new suppliers making entry into the market, this will probably cause a rise in market supply for the consumers.
Accordingly, the outward movement of the supply curve raises the supply level in the market of the product or service under consideration at each price also with a provided demand curve, there is a decline in the equilibrium price as indicated in the diagram above from point P1 to point P3 along with an increase in the level of output bought as well as sold, as shown above from point Q1 to Q3. Therefore, the change in supply levels leads to the expansion of the supply curve on the demand curve.
The equilibrium price as well as quantity in a market will shift if there are changes in market supply together with demand. As an illustration, the diagram below explains
The left diagram above depicts that, an inward change of supply caused by factors mentioned earlier above, along with a decline in demand results in a reduction in...