This comes from an actual newspaper story.The average price of a home in W County rose more than 12% last year but the number of sales fell nearly 15%.Its the old law of supply and demand, said a spokesman for the Board of Realtors.The number of sales is down because there's a higher demand for properties but there isn't a corresponding number to sell.
a.What does the old law of supply and demand predict would happen to price and quantity if the demand curve shifts outward and the supply curve does not change?
b.Draw a diagram to illustrate the case of a shift in demand and/or supply curves that is consistent with the observed change in prices and quantities.

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Alexandria Scherer · Accepted Answer

Final Answer :

a.The price would rise and the quantity would rise.Even if the supply were very inelastic, the number of sales would not fall if the supply curve did not shift.
b.One simple case would be a leftward shift in the supply curve and no change in the demand curve.

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