Price S Basics of Supply and Demand P* D Q* 1 Q Price CS S Adding Surplus P* D PS Q* 2 Q Price Shifting Demand S ¯D ¯P ¯Q Pold Pnew Note well: P = a – bQ Dold Dnew Qnew Qold 3 Q Change in intercept shifts demand, while a change in P or Q moves us along the curve. Price Sold Snew Shifting Supply Pold Pnew Dold Qold Qnew 4 Q ­S ¯ P ­Q Price Sold Snew1 Snew2 Shifting Supply and Demand Pold Pnew1 Pnew2 ¯D Dold ­S Dnew Qnew1 5 Qold Q Qnew2 ¯P ¯Q ¯ P ­Q
