What is the impact of shift in demand curve on equilibrium?

The correct answer is option 3: Both price and quantity changes in same direction

 

• When the demand curve shifts, the equilibrium price and quantity change in the same direction (either both increase or both decrease).

• The direction of change depends on whether the demand increases or decreases:

  1. If demand increases (rightward shift):

     • Price increases (higher willingness to pay).
     • Quantity increases (more is bought at every price level).

  2. If demand decreases (leftward shift):

     • Price decreases (lower willingness to pay).
     • Quantity decreases (less is bought at every price level).