CHAPTER 4THE MARKET FORCES OF SUPPLY AND DEMAND853.As Figure 4-11 shows, the shift in the supply curve raises the equilibriumprice from $2.00 to $2.50 and lowers the equilibrium quantity from 7 to 4cones. As a result of the earthquake, the price of ice cream rises, and thequantity of ice cream sold falls.Example: A Change in Both Supply and DemandNow supposethat the hot weather and the earthquake occur at the same time. To analyze thiscombination of events, we again follow our three steps.1.We determine that both curves must shift. The hot weather affects thedemand curve because it alters the amount of ice cream that householdswant to buy at any given price. At the same time, the earthquake alters thesupply curve because it changes the amount of ice cream that firms want tosell at any given price.2.The curves shift in the same directions as they did in our previous analysis:The demand curve shifts to the right, and the supply curve shifts to the left.
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.