Texas A&M University (TAMU) ECON202 Practice Exam 2

When the demand curve shifts more than the supply curve, the result is an increase in equilibrium price while the equilibrium quantity can vary. This occurs because a greater shift in demand indicates that consumers are willing to purchase significantly more of the good at any given price level compared to what they were before.

As demand increases more substantially than supply, the competition among buyers drives up the price. Sellers recognize they can charge more because more consumers want the product. The extent to which the equilibrium quantity changes depends on how much supply is able to increase in response to the higher prices, so it can either increase, remain the same, or even decrease if supply is very inelastic.

Therefore, the situation leads us to conclude that the equilibrium price will certainly rise, and the equilibrium quantity adjustment will depend on the reaction of the supply side, which explains why the equilibrium quantity can vary. This dynamic illustrates how shifts in demand and supply interact in the market to set new equilibrium levels.