Answer:
Market equilibrium is a state or a position where market demand equals market supply. Now, if the market demand increases, then it results in a change in the equilibrium.
Suppose \[{{D}_{1}}{{D}_{1}}\] and \[{{S}_{1}}{{S}_{1}}\] are the initial market demand curve and the initial market supply curve, respectively. The initial equilibrium is established at point \[{{E}_{1}}\], where the market demand curve and the market supply curve intersects each other. Accordingly, the equilibrium price is \[O{{P}_{1}}\] and the equilibrium quantity demanded is \[O{{q}_{1}}\].
Now, if there is an increase in the market demand, the market demand curve shifts parallely rightwards to\[{{D}_{2}}{{D}_{2}}\] from\[{{D}_{1}}{{D}_{1}}\], while the market supply curve remains unchanged at\[{{S}_{1}}{{S}_{1}}\]. This implies that at the initial price\[O{{P}_{1}}\], there exist excess demand equivalent to \[(O{{q}_{1}}-O{{q}_{1}})\] units. This excess demand will increase competition among the buyers and they will now be ready to pay a higher price to acquire more units of the good. This will further raise the market price. The price will continue to rise till it reaches\[O{{P}_{2}}\]. The new equilibrium is established at point\[{{E}_{2}}\], where the new demand curve\[{{D}_{2}}{{D}_{2}}\] intersects the supply curve\[{{S}_{1}}{{S}_{1}}\].
At the new equilibrium\[{{E}_{2}}\]
Equilibrium output has increased from\[O{{q}_{1}}\] to\[O{{q}_{2}}\]
Equilibrium price has increased from\[O{{P}_{1}}\] to\[O{{P}_{2}}\]
Hence, an increase in demand with supply remaining constant, results in rise in the equilibrium price as well as the equilibrium quantity.
Increase in Demand \[\Rightarrow \] Excess Demand at the Existing Price \[\Rightarrow \]Competition Among the Buyers Rise in the Price Level \[\Rightarrow \] New Equilibrium \[\Rightarrow \] Rise in both Quantity Demanded as well as price.
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