Four Possible Changes in Demand (D) and Supply (S) in a Market -- A Summary Richard Le

Do you know …  what would happen when either demand (D) or supply (S) in a market changes?  how to graph those changes?

When either D or S in a market changes …  the market equilibrium point would change, and  so the market (equilibrium) price, Pe, and the market (equilibrium) quantity, Qe, would change.

Implications  In the real world, prices of G&S change all the time.  The changes in prices are due to the changes in either the market demand (D) or the market supply (S) or both.  Buyers and sellers view the good in question differently.

Graph (Area I) P ($) Q (units/ period) E0E0 Q0Q0 P0P0 Area I S=> P Q I Higher (up) Lower (down) up down S0S0 D0D0 S1S1 E1E1 I Q1Q1 P1P1

Graph (Area II) P ($) Q (units/ period) E0E0 Q0Q0 P0P0 Area II D=> P Q II Higher (up) Lower (down) up down S0S0 D0D0 D1D1 E1E1 I Q1Q1 P1P1

Graph (Area III) P ($) Q (units/ period) E0E0 Q0Q0 P0P0 Area III S=> P Q III Higher (up) Lower (down) up down S0S0 D0D0 S1S1 E1E1 I Q1Q1 P1P1

Graph (Area IV) P ($) Q (units/ period) E0E0 Q0Q0 P0P0 Area IV D=> P Q IV Higher (up) Lower (down) up down S0S0 D0D0 D1D1 E1E1 I Q1Q1 P1P1

A Summary (Only the dominating side is shown.) P ($) Q (units/ period) E0E0 Q0Q0 P0P0 S D S D P Q Area I S=> P QArea II D=> P QArea III S=> P Q III IIIIV Area IV D=> P Q Higher (up) Lower (down) up down

Now you know …  what would happen when either demand (D) or supply (S) in a market changes.  how to graph those changes.