Changes in Equilibrium Lesson 2.7

Changes in Supply and Demand Law of Demand and Law of Supply describe what happens when prices change When price changes, what is really happening (with regards to the Supply and Demand Curves)?

What Happens when the Demand Curve Shifts Increasing Demand 1.Demand Shifts Right 2.Prices Increases 3.Quantity Increases 4.New Equilibrium Established Decreasing Demand 1.Demand Shifts Left 2.Prices Decrease 3.Quantity Decreases 4.New Equilibrium Established

What Happens when the Supply Curve Shifts Increasing Supply – Supply Shifts Right – Quantity Increases (surplus) – Price Decreases – New Equilibrium Established Decreasing Supply – Supply Shifts Left – Quantity decreases (shortage) – Prices Increases – New Equilibrium Established

Simultaneous Shifts in Supply and Demand Curves Equilibrium is rarely stable, with both supply and demand are changing all the time. – The final result is dependant on which change is more significant – Demand Increase, Supply Increase Price is variable, quantity increases – Demand Increase, Supply Decrease Price rises, quantity is variable – Demand Decrease, Supply Increase Price falls, quantity is variable – Demand Decrease, Supply Decrease Price in variable, quantity falls