Equilibrium of Demand and Supply:
The price of
a commodity in the market is determined by the interaction of the forces of
demand and supply. By "demand for a commodity" at a given price is meant:
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We
know that if the price rises, other things remaining the same,
people buy less of that commodity and if price falls, people buy
more of that commodity.
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Just as we have discussed the
effects of changes in demand on price, we can also explain the
effects of changes in supply on the equilibrium price.
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We have so far discussed the effects of changes in demand and
supply on equilibrium price separately. Let us now consider a
case in which changed in demand and supply take place,
simultaneously.
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