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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

If a perfectly competitive market in long-run equilibrium witnesses an increase in demand, what will happen to price?

To determine

Effect of increase in demand on price.

Explanation

If the perfect competitive market is in long run equilibrium, it witnesses an increase in demand and decrease in price. In the short run, the increase in demand increases the price of the goods and services in the market (ceteris paribus). It leads to maximize the profit of the firm. Higher or positive economic profit attracts the new firms to enter into the market. Increase in the number of firms in the market increases the market supply. Increase in the supply leads to fall or drop in the price level...

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