Changes in price & quantity
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Intros
Lessons
- Changes in Price & Quantity Overview:
- Changes in Demand
- Case 1: Increase in Demand
- Case 2: Decrease in Demand
- Changes in Supply
- Case 1: Increase in Supply
- Case 2: Decrease in Supply
- 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
Examples
Lessons
- Understanding Changes in Demand
You know that ice cream will be expensive in the future. Explain what happens to the demand curve, and what happens to the equilibrium price and quantity. - Suppose there is a demand for an inferior good, and recently your income has increased. Explain what happens to the demand curve, and what happens to the equilibrium price and quantity.
- Understanding Changes in Supply
Technology has been developed such that it cuts production costs to monitors. Explain what happens to the supply curve, and what happens to the equilibrium price and quantity. - A natural disaster has happened, and the production of water bottles has been slowed. Explain what happens to the supply curve, and what happens to the equilibrium price and quantity.
- Understanding Changes in Both Demand and Supply
Suppose a recent pollution has damaged most of you water in town. In addition, the summer season causes consumers to buy more water. The change in the water needed by consumers is more than the amount of water damaged. Explain what happens to both the demand and supply curve, and what happens to the equilibrium price and quantity. - The demand for chocolate is P = 30 - , and the supply for ice cream is = 10 + 2P
Topic Notes
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.
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 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.
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 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.
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.
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).
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).
