Market Effects of Changes in Demand or Changes in Supply

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Presentation transcript:

Market Effects of Changes in Demand or Changes in Supply The Price Adjustment Process

Increase in Demand Price S D D1 Quantity More people want a good (such as Play Station 2). Demand increases

Increase in Demand Price S D D1 Quantity Demand increases, product has become relatively more scarce and price rises

Decrease in Supply Price S1 S D Quantity Costs to supply the good have increased. Suppliers can supply less of the good. Supply decreases

Decrease in Supply Price S1 S D Quantity Supply decreases, product has become relatively more scarce and price rises

Decrease in Demand Price S D1 D Quantity Less people want a good (such as music tapes). Demand decreases

Decrease in Demand Price S D1 D Quantity Demand decreases, product has become relatively less scarce and price falls

Increase in Supply Price S S1 D Quantity Costs to supply the good have decreased. Suppliers can supply more of the good. Supply increases

Increase in Supply Price S S1 D Quantity Supply increases, product has become relatively less scarce and price falls

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