AP Economics Mr. Bernstein Module 7: Supply and Demand – Changes in Equilibrium October 10, 2014

AP Economics Mr. Bernstein What Happens When the Demand Curve Shifts? Know what caused the shift and which curve is shifting When Demand increases, Equilibrium Price and Quantity increase 2

AP Economics Mr. Bernstein What Happens When the Demand Curve Shifts? Example: New car market in a recession When Demand decreases, Equilibrium Price and Quantity decrease 3

AP Economics Mr. Bernstein What Happens When the Supply Curve Shifts? Example: New technology increases amount of corn grown per acre When Supply increases, Equilibrium Price decreases but Quantity increases 4

AP Economics Mr. Bernstein What Happens When the Supply Curve Shifts? Example: Rising cotton prices cause jean manufacturers to reduce output When Supply decreases, Equilibrium Price increases but Quantity decreases 5

AP Economics Mr. Bernstein What Happens When a Supply or Demand Curve Shifts? Know what caused the shift Remember curve shifts are horizontal, not vertical Curve shifts create a surplus or shortage as the prevailing price, so prices must shift to maintain equilibrium Carefully label all curves (ie D 1, D 2, S 1, S 2, etc.) to avoid confusing effects of simultaneous shifts 6

AP Economics Mr. Bernstein Simultaneous Shifts of Supply and Demand Curves Example: Demand for wheat rises but Supply for wheat decreases Equilibrium Price increases but Quantity change is ambiguous 7

AP Economics Mr. Bernstein Simultaneous Shifts of Supply and Demand Curves Example: Demand for Country Music decreases but Supply increases Equilibrium Price decreases but Quantity change is ambiguous 8

AP Economics Mr. Bernstein Simultaneous Shifts of Supply and Demand Curves Example: Demand for snowboards increases and Supply increases Equilibrium Price is ambiguous but Quantity change increases 9

AP Economics Mr. Bernstein Simultaneous Shifts of Supply and Demand Curves Example: Demand for Justin Beiber tickets decreases and Supply decreases Equilibrium Price is ambiguous but Quantity change decreases (awww…) 10