Changes in price & quantity

Changes in price & quantity

Lessons


Changes in either demand or supply can change the equilibrium price and quantity. Let’s explore the different changes that can happen in demand and supply, and see how the equilibrium price and quantity changes.


Changes in Demand

Case 1: Demand increases
In this case, the demand curve shifts rightward, and there will be in a new intersection. At the new intersection, we see that the equilibrium price and quantity have both increased.


Changes in demand increase shifts rightward

Case 2: Demand decreases
In this case, the demand curve shifts leftward. At the new intersection, we see that the equilibrium price and quantity have both decreased.


Changes in demand decrease shifts leftward

Changes in Supply

Case 1: Supply increases
In this case, the supply curve shifts rightward. At the new intersection, we see that the equilibrium price has decreased, and the equilibrium price has increased.


Changes in supply increase shifts rightward

Case 2: Supply decreases
In this case, the supply curve shifts leftward. At the new intersection, we see that the equilibrium price has increased, but the equilibrium price has decreased.


Changes in supply decrease shifts leftward

Changes in Both Demand and Supply

Case 1: Both Demand and supply increases
In this case, both the demand and supply curve shift rightward. At the new intersection, we will see that the equilibrium price is uncertain (depends on the magnitude of the changes), but the equilibrium quantity has increased.


Changes in both demand and supply increase shift rightward

Case 2: Both Demand and supply decreases
In this case, both the demand and supply curve shift leftward. At the new intersection, we see that the equilibrium price is uncertain (depends on the magnitude of the changes), but the equilibrium quantity has decreased.


Changes in both demand and supply decrease shift leftward

Case 3: Demand increases and supply decreases
In this case, the demand curve shifts rightward, but the supply curve shifts leftward. At the new intersection, we see that the equilibrium price increases, but the changes in equilibrium quantity is uncertain (depends on the magnitude of the changes).


Demand increases and supply decreases curve

Case 4: Demand decrease and supply increases
In this case, the demand curve shifts leftward, but the supply curve shifts rightward. At the new intersection, we see that the equilibrium price decreases, but the changes in equilibrium quantity is uncertain (depends on the magnitude of the changes).


Demand decrease and supply increases curve
  • Introduction
    Changes in Price & Quantity Overview:
    a)
    Changes in Demand
    • Case 1: Increase in Demand
    • Case 2: Decrease in Demand

    b)
    Changes in Supply
    • Case 1: Increase in Supply
    • Case 2: Decrease in Supply

    c)
    Changes in Both Demand and Supply
    • Case 1: Increase in Demand and Supply
    • Case 2: Decrease in Demand and Supply
    • Case 3: Increase in Demand, Decrease in Supply
    • Case 4: Decrease in Demand, Increase in Supply