1. MARKET ADJUSTMENTS Changes To Demand And Supply

2. MARKET ADJUSTMENTS l The price of a product remains at the equilibrium point until something changes the demand and/or supply in a market. l Changes in market demand or market supply are not unusual, in fact, most markets have demands and supplies that drift around a bit.

3. MARKET ADJUSTMENTS l Mostly, these change are ignored. However, large changes in demand or supply cannot be ignore. l It’s possible therefore, to examine the impact on equilibrium price and quantity of an increase or decrease in demand, and an increase or decrease in supply.

4. AN INCREASE IN DEMAND AS A TABLE

5. AN INCREASE IN DEMAND AS A GRAPH

6. AN INCREASE IN DEMAND IN EQUATION FORM Qd = 800 - 100(Price) and Qs = 100(Price) Set: Qd = Qs Substitute: 800 - 100(Price) = 100(Price) Simplify: 800 = 200(Price) Solve: $4 = Price Qd = 800 - 100(Price)Qs = 100(Price) Qd = 800 - 100(4)Qs = 100(4) Qd = 400 Qs = 400

7. MARKET ADJUSTMENT TO AN INCREASE IN DEMAND l When demand increases a larger quantity is demanded at every price. l The result is an increase in price to $4.00 and an increase in quantity to 400.

8. A DECREASE IN DEMAND AS A TABLE

9. A DECREASE IN DEMAND AS A GRAPH

10. A DECREASE IN DEMAND IN EQUATION FORM Qd = 400 - 100(Price) and Qs = 100(Price) Set: Qd = Qs Substitute: 400 - 100(Price) = 100(Price) Simplify: 400 = 200(Price) Solve: $2 = Price Qd = 400 - 100(Price)Qs = 100(Price) Qd = 400 - 100(2)Qs = 100(2) Qd = 200 Qs = 200

11. MARKET ADJUSTMENT TO A DECREASE IN DEMAND l When demand decreases a smaller quantity is demanded at every price. l The result is an decrease in price to $2.00 and an decrease in quantity to 200.

12. AN INCREASE IN SUPPLY AS A TABLE

13. AN INCREASE IN SUPPLY AS A GRAPH

14. AN INCREASE IN SUPPLY IN EQUATION FORM Qd = 600 - 100(Price) and Qs = 100(Price) +200 Set: Qd = Qs Substitute: 600-100(Price) = 100(Price)+200 Simplify: 400 = 200(Price) Solve: $2 = Price Qd = 600 - 100(Price) Qs = 100(Price)+200 Qd = 600 - 100(2) Qs = 100(2) + 200 Qd = 400 Qs = 400

15. MARKET ADJUSTMENT TO AN INCREASE IN SUPPLY l When supply increases a larger quantity is supplied at every price. l The result is a decrease in price to $2.00 and an increase in quantity to 400.

16. A DECREASE IN SUPPLY AS A TABLE

17. A DECREASE IN SUPPLY AS A GRAPH

18. A DECREASE IN SUPPLY IN EQUATION FORM Qd = 600 - 100(Price) and Qs = 100(Price) - 200 Set: Qd = Qs Substitute: 600-100(Price) = 100(Price)-200 Simplify: 800 = 200(Price) Solve: $4 = Price Qd = 600 - 100(Price) Qs = 100(Price)-200 Qd = 600 - 100(4) Qs = 100(4) - 200 Qd = 200 Qs = 200

19. MARKET ADJUSTMENT TO A DECREASE IN SUPPLY l When supply decreases a smaller quantity is supplied at every price. l The result is an increase in price to $4.00 and a decrease in quantity to 200.