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Unformatted text preview: price, too many people want the product but there isn’t enough for everyone to have • Firms then tend to increase prices • Example: If P = $1, • then QD = 21 lattes • and QS = 5 lattes • resulting in a shortage of 16 lattes • Facing a shortage, sellers raise the price, • causing QD to decrease and QS to increase,. .which reduces the shortage. • Prices continue to rise until market reaches equilibrium. When you think you have an equalibrium there can be a shock • A supply shock decreases in supply Another kind of a shock • Demand shock, demand curve shifts to the right What if these shocks occur at the same time *Any change in technology affects the supply curve...
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This note was uploaded on 11/16/2011 for the course ECON 1011 taught by Professor Irenefoster during the Fall '11 term at GWU.
- Fall '11