1. Market Effects of Changes in Demand or Changes in Supply
The Price Adjustment Process

2. Increase in Demand
Price S D D1
Quantity
More people want a good (such as Play Station 2). Demand increases

3. Increase in Demand
Price S D D1
Quantity
Demand increases, product has become relatively more scarce and price rises

4. Decrease in Supply
Price S1 S D
Quantity
Costs to supply the good have increased. Suppliers can supply less of the good. Supply decreases

5. Decrease in Supply
Price S1 S D
Quantity
Supply decreases, product has become relatively more scarce and price rises

6. Decrease in Demand
Price S D1 D
Quantity
Less people want a good (such as music tapes). Demand decreases

7. Decrease in Demand
Price S D1 D
Quantity
Demand decreases, product has become relatively less scarce and price falls

8. Increase in Supply
Price S S1 D
Quantity
Costs to supply the good have decreased. Suppliers can supply more of the good. Supply increases

9. Increase in Supply
Price S S1 D
Quantity
Supply increases, product has become relatively less scarce and price falls