Market Equilibrium Week 2

If a change in supply or demand occurs

• the current state is no longer in equilibrium

• The equilibrium price is higher

• The supply and demand curve won't cross

• All things stay the same

What increases demand?

• Increase in income

• Change in taste

• The decreased price of a substitute good

• The decreased price of a complementary good

D₀ to D₁

• Decrease in demand

• Decrease in quantity of demand

• Increase in demand

• Increase in quantity of demand

D₀ to D₂

• Decrease in demand

• Decrease in quantity of demand

• Increase in demand

• Increase in quantity of demand

What scenario suits the diagram

• Decrease in complementary good

• Decrease in income

• Regulations restricting consumption

• Increased cost of production

What scenario suits the diagram

• Decrease in complementary good

• Decrease in income

• Regulations allowing consumption

• Increased cost of production

With the original equilibrium price, the change in demand will lead to a

• Shortage

• Surplus

After the increase in income, the equilibrium price has increased and the equilibrium quantity has

Increase in demand shifts the curve to the

Decrease in demand shifts the curve to the