AP Economics
Mr. Bernstein
Module 7:
Supply and Demand – Changes in
Equilibrium
October 10, 2014
AP Economics
Mr. Bernstein
What Happens When the Demand Curve Shifts?
• Know what caused the shift and which curve is shifting
• When Demand increases, Equilibrium Price and Quantity increase
2
AP Economics
Mr. Bernstein
What Happens When the Demand Curve Shifts?
• Example: New car market in a recession
• When Demand decreases, Equilibrium Price and Quantity decrease
3
AP Economics
Mr. Bernstein
What Happens When the Supply Curve Shifts?
• Example: New technology increases amount of corn grown per acre
• When Supply increases, Equilibrium Price decreases but Quantity increases4
AP Economics
Mr. Bernstein
What Happens When the Supply Curve Shifts?
• Example: Rising cotton prices cause jean manufacturers to reduce output
• When Supply decreases, Equilibrium Price increases but Quantity decreases
5
AP Economics
Mr. Bernstein
What Happens When a Supply or Demand Curve
Shifts?
• Know what caused the shift
• Remember curve shifts are horizontal, not vertical
• Curve shifts create a surplus or shortage as the prevailing
price, so prices must shift to maintain equilibrium
• Carefully label all curves (ie D1, D2, S1, S2, etc.) to avoid
confusing effects of simultaneous shifts
6
AP Economics
Mr. Bernstein
Simultaneous Shifts of Supply and Demand Curves
• Example: Demand for wheat rises but Supply for wheat decreases
• Equilibrium Price increases but Quantity change is ambiguous
7
AP Economics
Mr. Bernstein
Simultaneous Shifts of Supply and Demand Curves
• Example: Demand for Country Music decreases but Supply increases
• Equilibrium Price decreases but Quantity change is ambiguous
8
AP Economics
Mr. Bernstein
Simultaneous Shifts of Supply and Demand Curves
• Example: Demand for snowboards increases and Supply increases
• Equilibrium Price is ambiguous but Quantity change increases
9
AP Economics
Mr. Bernstein
Simultaneous Shifts of Supply and Demand Curves
• Example: Demand for Justin Beiber tickets decreases and Supply decreases
• Equilibrium Price is ambiguous but Quantity change decreases (awww…)
10