If the equilibrium price for a two-liter bottle of Coca-Cola is $1.50 today, just like it was ten years ago, can we safely say that all supply and demand conditions in the market for Coke have remained very stable all these years?
What will be an ideal response?
Not necessarily. The demand curve might have shifted rightward continuously due to population growth in the United States and growing demand for Coke in other countries world-wide. Although that alone would have driven up the price, there could have been other factors shifting the supply curve rightward, such as improved technology for producing and transporting Coke, or declining sugar prices because of some great sugar harvests. Regardless of the reason, if the supply increased, so that the supply curve shifted rightward, then the increase in supply, which leads to a fall in the equilibrium price, can offset any increase in the demand. So, even if the price has remained constant, the only accurate statement is that any change in demand was accompanied by an equal sized change in the supply in the same direction.
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a. P 1
b. P 2
c. P 3
d. Q 1
Market demand is identical to individual demand.
Answer the following statement true (T) or false (F)