1.3 Price determination in a competitive market

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Question 17

The diagram below shows the supply curve ( $S$ ) and the demand curves ( $D_1\,$ and $D_2$ ) in the market for a consumer good. The initial market equilibrium is at $E_1$ .

Market Diagram

A fall in consumer incomes causes demand to decrease from $D_1\,$ to $D_2$ , resulting in a new market equilibrium at $E_2$ . The market mechanism that leads to the establishment of the new equilibrium is initiated by

excess demand for the good at the initial price of $P_1$ .

excess supply of the good at the new price of $P_2$ .

excess supply of the good at the initial price of $P_1$ .

excess demand for the good at the new price of $P_2$ .

1.3 Price determination in a competitive market Questions

A Level
Economics
1.3 Price determination in a competitive market

A Level
Economics AQA
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