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Unformatted text preview: sugar (an D2 input) causes sellers to supply less ice cram. The supply curve shifts D1 from S1 to S2, which from which causes the equilibrium price of ice cream to Quantity of Ice- rise from $2 to $2.5 Cream Cones and the equilibrium quantity to fall from 7 to 4 cones. to Example: A Change in Both Supply and Demand Change 1. 2. 3. Both curves must shift. The hot weather affects the demand curve because it alter the amount of ice cream that household want to buy at any given price. At the same time, when the hurricane drives up sugar prices, it alter the supply curve for ice cream because it changes the amount of ice cream that firms want to sell at any given price. The curves shifts in the same directions as they did in our previous analysis. The demand curves shifts to the right, and the supply curve shifts to the left. In both cases, the equilibrium price rises. Thus, these events certainly raise the price of ice cream, but their impact on the amount of ice cream sold is ambiguous. A Shift in Both Supply and Demand Shift Here we observe a simultaneous increase in demand and decrease Here in supply. Two outcomes are possible. In panel (a), the equilibrium price rises from P1 to P2, and the...
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This note was uploaded on 12/06/2011 for the course BUSINESS Finance taught by Professor Qiuxin during the Summer '11 term at Nanjing University.

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