Question

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Answer 1

The demand curve is downward sloping because the law of demand states that when prices fall, demand increases, other things remaining the same. There is a negative relationship between price of the good and quantity demanded.

The supply curve is upward sloping because quantity supplied increases with the rise in price of the good, other things remaining constant. There is a positive relationship between price of the good and quantity supplied.

Equilibrium in the market occurs when quantity demanded equals quantity supplied. In the diagram, p₀ is the equilibrium price and q₀ is the equilibrium quantity.

When the consumers shift to a healthy alternative, the demand for mayonnaise decreases. There is a shift in the demand curve to the left.

At the same time, when the suppliers come up with an alternative, the supply curve shifts to the right.

When demand falls and supply increases simultaneously , then the equilibrium price will fall.

When these two curves shift, p₁ is the new equilibrium price and q₁ is the new equilibrium quantity. The equilibrium price decreases and quantity increases.