Shifts of the Demand or Supply Curve

  • Demand shift to the right

    • Increase in equilibrium price

    • Increase in equilibrium quantity

  • Demand shift to the left

    • Decrease in equilibrium price

    • Decrease in equilibrium quantity

  • Supply shift to the right

    • Decrease in equilibrium price

    • Increase in equilibrium quantity

  • Supply shift to the left

    • Increase in equilibrium price

    • Decrease in equilibrium quantity

  • Graph

FIGURE 10 How an Increase in Demand Affects the Equilibrium An event that raises quantity demanded at any given price shifts the demand curve to the right. The equilibrium price and the equilibrium quantity both rise. Here an abnormally hot summer causes buyers to demand more ice cream. The demand curve shifts from D to D, , which causes the equilib- rium price to rise from $2.00 to $2.50 and the equilibrium quantity to rise from 7 to 10 cones. Price of Ice-cream 52.50 2.. resulting in a higher 3. \_ anda higher quantity sold. . Hot weather increases tip demard fu ice cream.. Supply New equilibrium Initial equilibrium Quantity of Ice-cream Cones

Price of 1. An increase in the price of Ice-cream sugar reduces the supply of ice cream New $2.50 equilibrium 2.00 resulting in a higher price of ice Initial equilibrium 3. ...andalower quantity' sold. FIGURE 11 How a Decrease in Supply Affects the Equilibrium An event that reduces quantity sup- plied at any given price shifts the supply curve to the left. The equilib- rium price rises, and the equilibrium quantity falls. Here an increase in the price of sugar (an input) causes sellers to supply less ice cream. The supply curve shifts from Sl to S2, which causes the equilibrium price of ice cream to rise from $2.00 to $2.60 and the equilibrium quantity to fall from 7 to 4 cones. Demand Quantity of Ice-cream Cones

  • Examples

    Machine generated alternative text: Demand for Steak (increase 111 Income Steaks are normal goods 个 & Equilibrium Quantity Equilibrium Price

    (Example 111 • Supply of Pizza (decrease in cost of cheese, which is an input) Equilibrium Price \_ J/\_ & Equilibrium Quantity

Shifts of Both the Demand and Supply Curves

  • Demand & supply shift to the right

    • Increase in equilibrium quantity

    • Equilibrium price unsure

  • Demand & supply shift to the left

    • Decrease in equilibrium quantity

    • Equilibrium price unsure

  • Supply shift to the left and demand shift to the right

    • Increase in equilibrium price

    • Equilibrium quantity unsure

  • Supply shift to the right and demand shift to the left

    • Decrease in equilibrium price

    • Equilibrium quantity unsure

  • Graph

FIGURE 12 A Shift in Both Supply and QEQI Here we observe a simultaneous increase in demand and decrease in supply. Two out- comes are possible. In panel (a), the equilibrium price rises from PI to P2 and the equilib- rium quantity rises from QI to In panel (b), the equilibrium price again rises from PI to P2 but the equilibrium quantity falls from QI to g. Demand Price of Ice-Cream Large Cone increase in demand (a) Price Rises, Quantity Rises New S2 equilibrium decrease Da su Initial equilibrium Quantity of Ice-Cream Cones (b) Price Rises, Quantity Falls Price of Ice-Cream Cone Small Increase In demand Initial equilibrium New equilibrium S2 Large decrease ppb' In Su Quantity of Ice-Cream Cones

  • Summary

    • Change in same direction: equilibrium quantity for sure

    • Change in opposite direction: equilibrium price for sure

  • Examples

    Example V Demand and Supply of Gas Guzzlin S s (Price of gasoline falls and wages o auto workers jncreqses ) cmler,mb E uilibrium Price & Equilibrium Quantity SUV VehiCk

    Example VI Demand and Supply of Coca-cola (Price of Pepsi Cola falls and cost of aluminum increases) Q x Equilibrium Quantity

Changes in equilibrium

No Change In Demand An Increase In Demand A Decrease In Demand No Change in Supply P same Q same p up Q up P down Q down An Increase in Supply P down Q up P ambiguous Q up P down Q ambiguous A Decrease in Supply Q down Q ambiguous P ambiguous Q down

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