Diagrams for Supply and Demand
This is a collection of diagrams for supply and demand. It is mainly for my benefit, so
when creating a post, like the price of tea I can easily find a suitable diagram to illustrate
what is happening.
Supply Shifts to the left
In this diagram the supply curve shifts to the left. It leads to a higher price and fall in
quantity demand. The supply curve may shift to the left because of:
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Higher costs of production
Higher taxes
Fall in productivity
1
Supply and Demand Shift Right
In this diagram, supply and demand have shifted to the right. This has led an increase in
quantity (Q1 to Q2) but price has stayed the same.
It is possible, that if there is an increase in demand (D1 to D2) this encourages firms to
produce more and so supply increases as well.
Diagram Showing Increase in Price
2
In this diagram, we have rising demand (D1 to D2) but also a fall in supply. The effect is
to cause a large rise in price.
For example, if we run out of oil, supply will fall. However, economic growth means
demand continues to rise.
Increase in Demand
An increase in demand leads to higher price and higher quantity.
A fall in Demand
3
Fall in demand increase supply
Fall in Supply
Fall in supply causing lower quantity and higher price.
4
Increase Demand Fall in Supply
Increase in demand and fall in supply leading to higher price.
Increase in supply – inelastic demand
5
Market equilibrium
6
Fall in price from increase in supply and fall in demand
Fall in supply leading to higher price of oil
7
Rise in Demand
Increase in demand causes supply to increase in long term.
8
Increase in supply with inelastic demand.
Price set below the equilibrium (football)
Inelastic supply and bigger increase in demand
UK Housing market has often seen demand increase at a faster rate than supply,
causing price to rise.
9
Supply increases same as demand.
10
Elasticity
The effect of a subsidy depends on elasticity of demand
The effect of a tax depends on elasticity of demand
11