The market demand curve for a good shifts rightward while the supply curve stays unchanged (fixed number of firms). Which of the following is NOT correct?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → The equilibrium quantity rises but the equilibrium price falls.
A rightward shift of demand with supply unchanged creates excess demand at the old price. The price rises, and both price and quantity go up.
Option (1) At the old equilibrium price, there is excess demand. — True. At the old price buyers now want more than firms supply, so there is excess demand.
Option (2) At any price, the quantity demanded is more than before. — True. A rightward shift means more is demanded at every price.
Option (3) Some buyers are willing to pay a higher price, so the price tends to rise. — True. Buyers who cannot get the good offer more, so the price tends to rise.
Option (4) The equilibrium quantity rises but the equilibrium price falls. — False. The price does not fall. The new equilibrium has a higher price as well as a higher quantity.
NCERT (2026-27): “Demand Shift … Now suppose the market demand curve shifts rightward to DD2 with supply curve remaining unchanged at SS0, as shown in panel (a). This shift indicates that at any price the quantity demanded is more than before. Therefore, at price p0 now there is excess demand in the market equal to q0q''0 . In response to this excess demand some individuals will be willing to pay higher price and the price would tend to rise. The new equilibrium is attained at G where the equilibrium quantity q2 is greater than q0 and the equilibrium price p2 is greater than p0.” |