1. Changes in Quantity Demanded and Quantity Supplied

2. …which causes the Equilibrium Price and the Equilibrium Quantity in the market to change
By now, you know how to shift either the Demand Curve or the Supply Curve….
But there is ONE more important thing that occurs when one of the curves shifts
When one of the curves shifts, it impacts the other curve in a way we call “Changing the Quantity Supplied” or “Changing the Quantity Demanded”

3. But what do we say is happening to the Supply Curve?
In the Market for Chocolate Candy, what happens to Equilibrium Price and Quantity if Halloween is 4 days away?
Let’s work our way through an example: P Q S D
Demand will Increase, causing Equilibrium P and Q to increase D1 P1 Q1
We have shifted the Demand curve, causing a
Change in Demand
But what do we say is happening to the Supply Curve?

4. Instead, we say that there has been a CHANGE IN QUANTITY SUPPLIED
When the Demand Curve shifts, it means that ALL of the buyers have changed their preferences, so we’ve drawn a new curve to show this change
We call this a Change in Demand P Q S D D1 P1 Q1
But the Supply Curve hasn’t moved, so we can’t say that there has been a Change in Supply
Instead, we say that there has been a CHANGE IN QUANTITY SUPPLIED
The change in Equilibrium Price caused by the Change in Demand causes SOME of the sellers to react to the price change
We move from one point on the Supply Curve to another point on the same Supply Curve

5. This also illustrates the
If we were to take away the Demand Curves on the graph, this is what we’d be left with… S P1 P D1
Now it’s easier to see that we MOVE ALONG the supply curve from one point to another point when the price of the good changes D Q Q1
This also illustrates the
LAW OF SUPPLY
Price and Quantity Supplied are DIRECTLY related
When Price of the good increases, the Quantity Supplied also increases
When Price of the good decreases, the Quantity Supplied also decreases

6. There is a CHANGE IN SUPPLY
What happens to the Equilibrium Price and Quantity in the Market for Bananas if the US Government limits imported bananas?
Let’s look at a Change in Supply… S1 P1 Q1 P Q S D
There is a CHANGE IN SUPPLY
Supply will decrease, causing Equilibrium Price to rise and Equilibrium Quantity to decrease
The Demand Curve doesn’t shift, so there can’t be a CHANGE IN DEMAND….instead we have a CHANGE IN QUANTITY DEMANDED
The Equilibrium Price increase causes the buyers to react to the price change
SOME buyers change their preferences due to the new price
There is a move from one point on the Demand Curve to another point on the same Demand Curve

7. This illustrates the LAW OF DEMAND
If we were to take away the Supply Curves on the graph, this is what we’d be left with… S1 S
Once again, we just MOVE ALONG the demand curve from one point to another point when the price of the good changes P1 P D Q1 Q
This illustrates the LAW OF DEMAND
Price and Quantity Demanded are INVERSELY related
When Price of the good increases, the Quantity Demanded will decrease
When Price of the good decreases, the Quantity Demanded will increase

8. will trigger a price change that will cause a
So, when one curve shifts, it causes the price of the good to change AND a movement from one point to another point on the other curve
A CHANGE IN DEMAND
will trigger a price change that will cause a
CHANGE IN QUANTITY SUPPLIED
A CHANGE IN
SUPPLY
will trigger a price change that will
cause a
CHANGE IN
QUANTITY DEMANDED