Jump to first page Impact on Equilibrium Price and Quantity of Demand Curve Shifters S E1E1 P E1 Q E1 1. Draw equilibrium condition 3. Determine new equilibrium price and quantity: P E2 Q E2 E2E2 a. Prediction: an increase in demand will increase equilibrium price and equilibrium quantity. P E3 Q E3 E3E3 b. Prediction: a decrease in demand will decrease equilibrium price and equilibrium quantity. Steps to solution: 2. Using description, shift curve in the appropriate way.

Jump to first page Impact on Equilibrium Price and Quantity of Supply Curve Shifters E1E1 P E1 Q E1 1. Draw equilibrium condition 3. Determine new equilibrium price and quantity: Steps to solution: S1S1 D 2. Using description, shift curve in the appropriate way. S2S2 S3S3 E2E2 P E2 Q E2 a. Prediction: an increase in supply will decrease equilibrium price and increase equilibrium quantity. P E3 Q E3 E3E3 b. Prediction: a decrease in supply will increase equilibrium price and decrease equilibrium quantity.

Jump to first page Shifts in Both Curves (4 possible combinations 2. DEMAND  Price , Quantity  1. DEMAND  Price , Quantity  3. SUPPLY  Price , Quantity  4. SUPPLY  Price , Quantity  How do you combine these??

Jump to first page Hypothetical Scenarios for combinations 1. DEMAND  Price , Quantity  3. SUPPLY  Price , Quantity  (If D > S, P  ) (If D = S, P is unchanged) (If D < S, P  ) In this scenario Equilibrium Price is uncertain, but quantity increases

Jump to first page Hypothetical Scenarios for combinations (If D > S, Q  ) (If D = S, Q is unchanged) (If D < S, Q  ) In this scenario Equilibrium Price increases, but quantity is indeterminant 1. DEMAND  Price , Quantity  4. SUPPLY  Price , Quantity 

Jump to first page Hypothetical Scenarios for combinations (If D > S, Q  ) (If D = S, Q is unchanged) (If D < S, Q  ) In this scenario Equilibrium Price decreases, but quantity is indeterminant 3. SUPPLY  Price , Quantity  2. DEMAND  Price , Quantity 

Jump to first page Hypothetical Scenarios for combinations (If D > S, P  ) (If D = S, P is unchanged) (If D < S, P  ) In this scenario Equilibrium Price is indeterminant, and quantity decreases. 2. DEMAND  Price , Quantity  4. SUPPLY  Price , Quantity 