Supply and Demand Curve Shift Handout

Supply and Demand Curve Shift Handout - Examples of Supply...

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Examples of Supply and Demand with Both Curves Moving Let’s think about the market for gasoline since we all buy gas and it is often in the news. Remember the three steps for analyzing a change in equilibrium. 1. Which curve shifts or do both shift? 2. Which direction does it shift? 3. Examine the new equilibrium. What happened to P? Q? 1. First let’s examine what happens if the number of drivers increases. Which curve shifts? Which direction? What happened to P? Q? Draw a supply and demand diagram below and show the effect of this event. (hint: use dashed lines to show the new position of the curve or curves.) P Q D 1 S 1 P 1 Q 1 Market for Gasoline
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2. Now let’s look at a change in the production process. Assume a new discovery of oil in the Middle East decreases the price of oil, an input into gasoline. Which curve shifts? Which direction? What happened to P? Q? Draw a supply and demand diagram below and show the effect of this event. P Q D 1 S 1 P 1 Q 1 Market for Gasoline
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Now let’s assume that both events take place, the number of drivers increases and the price of oil decreases. Which curve shifts? Which direction? What happened to P? Q? Draw a supply and demand diagram below and show the effect of these events. Assume that the number of drivers only increases a little but the price of oil decreases a lot! P
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This note was uploaded on 01/05/2012 for the course ECN 222 taught by Professor Lawson during the Summer '08 term at University of North Carolina Wilmington.

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Supply and Demand Curve Shift Handout - Examples of Supply...

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