Changes in Equilibrium Lesson 2 7 Changes in

Changes in Equilibrium Lesson 2. 7

Changes in Supply and Demand • Law of Demand Law of Supply describe what happens when prices change • When price changes, what is really happening (with regards to the Supply and Demand Curves)?

What Happens when the Demand Curve Shifts • Increasing Demand 1. 2. 3. 4. Demand Shifts Right Prices Increases Quantity Increases New Equilibrium Established • Decreasing Demand 1. Demand Shifts Left 2. Prices Decrease 3. Quantity Decreases 4. New Equilibrium Established

What Happens when the Supply Curve Shifts • Increasing Supply – – Supply Shifts Right Quantity Increases (surplus) Price Decreases New Equilibrium Established • Decreasing Supply – – Supply Shifts Left Quantity decreases (shortage) Prices Increases New Equilibrium Established

Simultaneous Shifts in Supply and Demand Curves • Equilibrium is rarely stable, with both supply and demand are changing all the time. – The final result is dependant on which change is more significant – Demand Increase, Supply Increase • Price is variable, quantity increases – Demand Increase, Supply Decrease • Price rises, quantity is variable – Demand Decrease, Supply Increase • Price falls, quantity is variable – Demand Decrease, Supply Decrease • Price in variable, quantity falls