MicroeconomicsLesson 1 of 2 in the course Demand and Supply

Market Equilibrium Analysis: Curve Shifts, Combined Effects, and Adjustment

5 flashcards · 5 quiz questions · 5 match pairs · 4 fill-in sentences · English

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Summary

This lesson introduces a systematic way to predict how an economic event changes a market’s equilibrium price and quantity. The four-step process helps distinguish which curve changes, in which direction it shifts, and what happens to the new equilibrium.

A demand-and-supply model represents the choices of buyers and sellers in a market. The demand curve slopes downward: as a good’s price rises, buyers generally want to purchase less. The supply curve slopes upward: as a good’s price rises, producers generally want to sell more.

All flashcards

What is market equilibrium?
It is the point where the demand and supply curves intersect. At that point, quantity demanded equals quantity supplied, establishing the equilibrium price and quantity.
What is the four-step process used for?
It is a structured method for predicting how an economic event changes equilibrium price and quantity by establishing a starting model, identifying the affected curve, determining its shift, and comparing equilibria.
Name two common demand shifters.
Examples include income, population, tastes, expectations about future prices, and the prices of substitutes or complements.
Name two common supply shifters.
Examples include natural conditions, input prices, technology, and government policies that affect production.
What does a rightward shift indicate?
It indicates an increase in demand or supply, meaning buyers want to purchase more or producers want to sell more at every given price, depending on which curve shifts.

Quiz questions

  1. What does the intersection of the demand and supply curves identify?Answer: The market price and quantity where buyers' and sellers' planned quantities match.
  2. Which curve slopes downward under the law of demand?Answer: The demand curve.
  3. How is a change in consumer tastes toward a product generally classified?Answer: As a factor that shifts demand.
  4. An event decreases supply at every price. Which curve change follows?Answer: Supply shifts left, and the new intersection is found.
  5. Why establish the initial equilibrium before analyzing a market event?Answer: It provides the starting price and quantity for comparison.

Based on Principles of Economics 3e by Steven A. Greenlaw, David Shapiro, Daniel MacDonald (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.

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