Understanding Equilibrium Shifts and Market Reactions in Economics
Explore the impact of events on supply and demand, equilibrium shifts, new price and quantity levels, market corrections for disequilibrium, shortages, and surpluses. Learn how markets adjust to maintain balance and prices fluctuate based on changes in supply and demand. Discover the dynamics of market forces in response to shifts and their effects on equilibrium.
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THE THREE QUESTIONS ARE? Does the event (headline ) affect Demand, Supply, or Both? Does the event (headline ) affect Demand, Supply, or Both? Does the event (headline Does the event (headline ) shift the graph to the right (increase) or Left (decrease)? ) shift the graph to the right (increase) or Left (decrease)? What are the new equilibrium price and quantity? (P2 & Q2) What are the new equilibrium price and quantity? (P2 & Q2) Plus How will the market react to correct the disequilibrium? Plus How will the market react to correct the disequilibrium?
IS THE NEW EQUILIBRIUM ABOVE THE OLD ONE AND DID Q2 INCREASE? A shortage will occur, you ll have to wait in line to be Satisfied. Prices will be pushed up too
IF THE NEW EQUILIBRIUM IS ABOVE THE OLD BUT Q2 IS SMALLER THAN Q1IS? There will be a surplus and too much will There will be a surplus and too much will be available in the market. be available in the market. Prices will be pushed down and items Prices will be pushed down and items will go on sale to reduce inventory will go on sale to reduce inventory
WHAT IF DEMAND AND SUPPLY BOTH SHIFT See Page 107 See Page 107
