Question

Trace the effect of demand shifts on equilibrium price and quantity.

Answer 1

If the supply of a commodity remains constant, an increase in demand raises the price and a decrease in demand lowers the price.
The given diagram shows that when demand increases from DD to $D_1{D}_1$, price increases from OP to $O{P}_1$. When demand decreases from DD to $D_2{D}_2$, price decreases from OP to $O{P}_2$. Quantity sold increases with increase in demand and decreases with a decrease in demand.