CHAPTER 3 SUPPLY AND DEMAND E CONOMICS S ECOND E DITION R OBERT E. H ALL S TANFORD U NIVERSITY M ARC L IEBERMAN N EW Y ORK U NIVERSITY

ECONOMICS 2e / HALL & LIEBERMAN CHAPTER 3 / SUPPLY AND DEMAND © 2001 South-Western 2 Table 2 Demand for Maple Syrup in Wichita Figure 2 A Shift of Demand Curve Original Quantity Demanded (Bottles per Month) Price (per Bottle) $1.007, , , , ,500 Number of Bottles Price per Bottle B $2.00 D 1 6,000 NewQuantity Demanded After Increase in Income (Bottles per Month) 9,500 8,000 7,000 6,000 5,500 C 8,000 D 2

ECONOMICS 2e / HALL & LIEBERMAN CHAPTER 3 / SUPPLY AND DEMAND © 2001 South-Western 3 Figure 3 Changes in Demand and in Quantity Demanded Quantity Price Entire demand curve shifts rightward when: income wealth price of substitute price of complement expected price tastes shift toward good D 2 D 1 (b)(c) Quantity Price (a) P 2 Q 2 Q 1 Q 3 P 1 P 3 Price increase moves us leftward demand curve along Price decrease moves us rightward demand curve along Quantity Price Entire demand curve shifts leftward when: income wealth price of substitute price of complement expected price tastes shift away from good D 1 D 2

ECONOMICS 2e / HALL & LIEBERMAN CHAPTER 3 / SUPPLY AND DEMAND © 2001 South-Western 4 Table 4 Increase in Supply of Maple Syrup in Wichita Quantity Supplied (Bottles/Month) Price (per Bottle) $1.002, , , , ,500 Figure 5 A Shift of the Supply Curve Number of Bottles Price per Bottle G S 1 6,000 $4.00 Quantity Supplied After Increase in Supply 4,500 6,000 7,000 8,000 8,500 S 2 J 8,000

ECONOMICS 2e / HALL & LIEBERMAN CHAPTER 3 / SUPPLY AND DEMAND © 2001 South-Western 5 Figure 6 Changes in Supply and in Quantity Supplied Quantity Price Entire supply curve shifts rightward when: price of input profitability of alternate good productive capacity expected price S 2 S 1 (b)(c) Quantity Price S 1 S 2 Quantity Price (a) P 2 Q 3 Q 1 Q 2 P 1 P 3 Price increase moves us rightward supply curve along Price decrease moves us leftward supply curve along S Entire supply curve shifts leftward when: price of input profitability of alternate good productive capacity expected price

ECONOMICS 2e / HALL & LIEBERMAN CHAPTER 3 / SUPPLY AND DEMAND © 2001 South-Western 6 Figure 7Market Equilibrium Number of Bottles Price per Bottle H I 1.00 D S 7,5002,500 Excess Demand 5,000 E $3.00

ECONOMICS 2e / HALL & LIEBERMAN CHAPTER 3 / SUPPLY AND DEMAND © 2001 South-Western 7 Figure 8Excess Supply and Price Adjustment Number of Bottles Price per Bottle KL D S $5.00 3,5006,500 Excess Supply at $5.00 5,000 E 3.00

ECONOMICS 2e / HALL & LIEBERMAN CHAPTER 3 / SUPPLY AND DEMAND © 2001 South-Western 8 Figure 9A Shift of Supply and a New Equilibrium Number of Bottles Price per Bottle E3.00 D 5,000 S 1 $5.00 3,500 S 2 E ´

ECONOMICS 2e / HALL & LIEBERMAN CHAPTER 3 / SUPPLY AND DEMAND © 2001 South-Western 9 Figure 10A Shift of Demand and a New Equilibrium Number of Houses Average Price E 254,450 S 1995 D E ´ $373,750 D 2000

ECONOMICS 2e / HALL & LIEBERMAN CHAPTER 3 / SUPPLY AND DEMAND © 2001 South-Western 10 Figure 11Simultaneous Shifts of Supply and Demand Hours of Day Care Price per Hour A S 1990 P Q D D 2000 P B S Q

ECONOMICS 2e / HALL & LIEBERMAN CHAPTER 3 / SUPPLY AND DEMAND © 2001 South-Western 11 Table 5 Effect of Supply and Demand Shifts on Equilibrium Price (P) and Quantity (Q)

ECONOMICS 2e / HALL & LIEBERMAN CHAPTER 3 / SUPPLY AND DEMAND © 2001 South-Western 12 Figure 12The Market for Oil Barrels of Oil Price per Barrel of Oil D P 1 E Q 1 S 1 Q 2 S 2 E ´ P 2

ECONOMICS 2e / HALL & LIEBERMAN CHAPTER 3 / SUPPLY AND DEMAND © 2001 South-Western 13 Figure 13The Market for Natural Gas Cubic Feet of Natural Gas Price per Cubic Foot of Natural Gas P 3 F Q 3 S D 1 Q 4 D 2 F ´ P 4