Answer:
Suppose \[{{D}_{1}}{{D}_{1}}\] and \[{{S}_{1}}{{S}_{1}}\] are the initial market demand curve and 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, assume that market demand increases (may be due to an increase in the consumer?s income). This shifts the market demand curve parallel 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 (\[O{{q}_{1}}-O{{q}_{3}}\]) 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 good. This will further raise the market price. The rise in the price will continue till the market price becomes \[O{{P}_{2}}\]. The new equilibrium is established at point\[{{E}_{2}}\]. Where the new demand curve \[{{D}_{2}}{{D}_{2}}\] intersects the supply curve\[{{S}_{1}}{{S}_{1}}\]. Observe that at the new equilibrium both market price and quantity demanded are more than the initial equilibrium. The new equilibrium quantity supplied \[O{{q}_{2}}\] and the new equilibrium price is\[O{{P}_{2}}\]. Hence, an increase in demand with supply remaining constant, results in rise in the equilibrium price as well as the equilibrium quantity.
To summarise,
Increase in demand \[\Rightarrow \] Excess demand at the existing price \[\Rightarrow \]Competition among the buyers \[\Rightarrow \] Rise in the price level \[\Rightarrow \]New equilibrium\[\Rightarrow \]
Rise in both quantity demanded as well as price.
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