May/June 2026 Paper 11

2026 · 30 questions · 30 parts · 30 marks

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7Market Equilibrium Price MechanismHard1 mark

The diagram shows the demand and supply curves of a normal good (X).

Q_{1} P_{1}

is the initial equilibrium.

Demand and supply curves for normal good X, price on the vertical axis and quantity on the horizontal axis. Supply curve S₁ and demand curve D₁ cross at the initial equilibrium, price P₁ and quantity Q₁. A second supply curve S₂ (to the left of S₁, a decrease in supply) and a second demand curve D₂ (to the right of D₁, an increase in demand) cross at a new equilibrium with a higher price P₂ and higher quantity Q₂.

Other things being equal, what may cause the change in the market equilibrium to

Q_{2} P_{2}