Which of the following best describes the effect of an increase in demand on the standard supply and demand graph used in AP Macroeconomics?

• A. The supply curve shifts to the left, leading to a higher equilibrium price and lower quantity.
• B. The supply curve shifts to the right, leading to a lower equilibrium price and higher quantity.
• C. The demand curve shifts to the right, leading to a higher equilibrium price and quantity.
• D. The demand curve shifts to the left, leading to a lower equilibrium price and quantity.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the basic components of the supply and demand graph. The demand curve shows the relationship between price and quantity demanded, while the supply curve shows the relationship between price and quantity supplied.
2. Step 2: Recognize what an increase in demand means. An increase in demand means that at every price level, consumers want to buy more of the good or service than before.
3. Step 3: Identify how the demand curve shifts with an increase in demand. Since consumers want more at every price, the demand curve shifts to the right.
4. Step 4: Analyze the effect of the rightward shift of the demand curve on equilibrium. The new intersection point with the supply curve will be at a higher price and a higher quantity compared to the original equilibrium.
5. Step 5: Conclude that an increase in demand leads to a rightward shift of the demand curve, resulting in a higher equilibrium price and a higher equilibrium quantity on the standard supply and demand graph.