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demand
d
d curve
supply curve
Factors causing shifts of the demand curve and
shifts of the supply curve.
Market equilibrium
Demand and supply shifts and equilibrium prices
Shifts in Demand
The
Ch
Changes
in the
h prices off related
l d goods.
d
Changes in income
Price
Income
falls, or
prices
or tastes
change
D
Quantity
D
Q
10
Changes in technology.
11
12
S
S
Changing diet fads will reduce the supply of products like low
carbohydrate bread and pasta.
Market Equilibrium
Changes in expectations.
An Example
Market Equilibrium
13
14
Demand is Q = 64-5P
Supply is P=4+2Q
Solve for the equilibrium,
graph your result.
D: Q=64-5P
S:Q=-2+.5P, set D=S
Implies 64-5P=-2+.5P
5.5P=66, implies P=12
and Q=4
S
P
(5,14)
(0,12.8)
D
Equilibrium
(4,12)
(0,4)
(64,0)
Q
15
S
P
Surplus
Equilibrium
D
Quantity demanded
Quantity supplied
Q
17
18
Price
leads to a movement
along the supply curve to a
hi h equilibrium
higher
ilib i
price
i andd
quantity
P
P
S
S
P
P
D
Q
leads
l d to a
movement along
the demand curve
to a higher
equilibrium price
and lower
quantity
Quantity
Quantity
D
Q falls, P ? (up here)
D
Q of oranges
Manufacturing
efficiencies and viruses
S
S
S
Q of computers