How do changes in supply
or demand affect
equilibrium prices and
quantities exchanged?
Quantity Exchanged

It’s simple.
– An increase in supply or demand causes an
increase in quantity exchanged.
– A decrease in supply or demand causes a
decrease in quantity exchanged.
Equilibrium Price

It’s simple.
– An increase in supply or a decrease in
demand puts downward pressure on prices.
– A decrease in supply or an increase in
demand puts upward pressure on prices.
Changes in Supply or Demand
Increase in
Supply
Decrease in
Supply
Increase in
Demand
Decrease in
Demand
Impact on
Equilibrium
Price
Down
Impact on
Quantity
Exchanged
Up
Up
Down
Up
Up
Down
Down
What has caused
these prices to change?







Computer prices fall.
It is September and peach, berry, and other fruit
prices rise.
It is the middle of salmon season and prices are
rising.
The price of a major league baseball star’s
rookie card is falling.
The price of artichokes rises.
The price of yo-yo’s falls.
The price of ancient statues falls.
Market Analysis
Change in
Supply
(WAGTIP)
Change in
Demand
(TIPSE)
Increase
Equilibrium
Price
Quantity
Supplied
Down
_________
Decrease
_________
Up
Up
Down
Down
_________
Up
Up
_________
Up
_________
Decrease
_________
Quantity
Exchanged
_________
Up
Increase
Quantity
Demanded
Down
Down
Down
_________
How do changes in demand affect
quantity supplied?

A change in quantity supplied occurs in the
short-run as suppliers respond to a change in
the price of the product with no change in
WAGTIPS.
If demand increases, price will rise, and
suppliers will attempt to squeeze more out of
their resources with no change in WAGTIPS.
 If demand falls, price will fall, causing suppliers
to supply less, with no change in WAGTIPS.
 Change in demand causes a change in price
which causes a change in quantity supplied, no
change in WAGTIPS.

How do changes in supply affect
quantity demanded?
A change in quantity demanded occurs as
buyers respond to a change in the price of the
product with no change in TIPSE. If supply
increases, price will fall and buyers will buy more
with no change in TIPSE.
 If supply decreases, price will rise and buyers
will buy less with no change in TIPSE.
 Change in supply causes a change in price which
causes a change in quantity demanded with no
change in TIPSE.

Questions
Demand or supply?
 Increase or decrease?
 Equilibrium price?
 Quantity supplied?
 Quantity demanded?
 Quantity exchanged?
