blanchard_ch03

50 supply new 200 supply new 250 200 150 100 demand

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Unformatted text preview: 15 20 Quantity (millions of bars) 0 ? 5 ? Demand (new) 10 15 20 Quantity (millions of bars) (d) Increase in supply (e) Increase in both demand and supply (f) Decrease in demand; increase in supply Price (dollars per bar) 0 Demand (original) 1.00 Price (dollars per bar) 5 6 Price (dollars per bar) 0 Demand (new) 0 ? 1.00 0.50 Demand (original) (c) Decrease in demand Supply (original) 3.00 1.50 2.00 0.50 10 15 20 Quantity (millions of bars) 5 0 (a) No change in demand or supply 3.00 2.50 1.00 Price (dollars per bar) 5 Supply 3.00 1.50 1.00 0.50 0 Supply 3.00 Price (dollars per bar) The Effects of All the Possible Changes in Demand and Supply Price (dollars per bar) Price (dollars per bar) FIGURE 3.10 Price (dollars per bar) 70 Supply (new) 3.00 Supply (original) 2.50 2.00 Supply (new) 3.00 Supply (original) 2.50 2.00 Demand (new) Supply (new) 3.00 Supply (original) 2.50 2.00 1.50 1.50 1.50 1.00 1.00 ? 1.00 Demand 0.50 Demand (original) 5 15 20 10 Quantity (millions of bars) (g) Decrease in supply animation 0 5 15 20 10 Quantity (millions of bars) 0 Demand (original) 0.50 0.50 ? 0 ? Demand (newl) ? (h) Increase in demand; decrease in supply 5 15 20 10 Quantity (millions of bars) (i) Decrease in both demand and supply 9160335_CH03_p053-080.qxd 6/22/09 8:56 AM Page 71 P redicting Changes in Price and Quantity All the Possible Changes in Demand and Supply Figure 3.10 brings together and summarizes the effects of all the possible changes in demand and supply. With what you’ve learned about the effects of a change in either demand or supply, you can predict what happens if both demand and supply change together. Let’s begin by reviewing what you already know. Change in Demand with No Change in Supply The first row of Fig. 3.10, parts (a), (b), and (c), summarizes the effects of a change in demand with no change in supply. In part (a), with no change in either demand or supply, neither the price nor the quantity changes. With an increase in demand and no change in supply in part (b), both the...
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This note was uploaded on 04/04/2012 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue.

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