Answer to Question 1
An increase in demand means buyers will buy more at any price; or are willing and able to pay more to get any given quantity. Increases in demand can be caused by increases in tastes for the product, an increase in incomes (if the product is normal), an increase in the price of a substitute, a lower priced complement, and expectations of a higher future price. There are many other factors that could cause an increase in demand. An increase in demand is reflected graphically as a rightward shift of the demand curve.
An increase in supply means sellers will put more up for sale at any price; or are willing and able to accept a lower price to make any given quantity available for sale. Increases in supply are generally caused by anything that reduces costs of production (e.g. increases in technology, lower resource costs) or increases in the number of sellers. An increase in supply is reflected graphically as a rightward shift of the demand curve.
Answer to Question 2
The law of demand states that there is an inverse relationship between the price and the quantity demanded. The law of supply demands that there is a direct relationship between the price and the quantity supplied. The demand curve is downward sloping while the supply curve is upward sloping.
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Suppose the market supply curve is p = 5Q. If price increases from 10 to 15, the change in ...