How Does Increased Peanut Demand Affect Equilibrium Price and Quantity?

Peanut Demand Rises, Supply Stays Put: What Happens to Price and Quantity?

Let's imagine the demand for peanuts suddenly increases while the supply remains the same. Here's how this impacts the equilibrium price and quantity:

1. Equilibrium Price:

Increased demand with a fixed supply puts upward pressure on the price. Why? Because consumers want more peanuts and are willing to pay more to get them. This drives up the equilibrium price until the market finds a new balance.

2. Equilibrium Quantity:

Even though the supply hasn't changed, the higher demand means a greater quantity of peanuts will be bought and sold. Consumers are happy to purchase more at the new, higher price. This leads to an increase in the equilibrium quantity.

In a Nutshell:

When demand for peanuts rises while supply stays constant, we see:

• Higher equilibrium price: Consumers pay more for peanuts.* Higher equilibrium quantity: More peanuts are exchanged in the market.

This example illustrates the fundamental principles of supply and demand at work. Understanding these forces helps explain how prices and quantities adjust in response to changing market conditions.