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Unformatted text preview: the quantity supplied increases to 15
million energy bars a week, as highlighted in the figure. There is an increase in the quantity supplied but
no change in supply—a movement along, but no shift
of, the supply curve. A Decrease in Demand
We can reverse this change in demand. Start at a price
of $2.50 a bar with 15 million energy bars a week
being bought and sold, and then work out what happens if demand decreases to its original level. Such a
decrease in demand might arise if people switch to
energy gel (a substitute for energy bars). The decrease
in demand shifts the demand curve leftward. The equilibrium price falls to $1.50 a bar, and the equilibrium
quantity decreases to 10 million bars a week. Demand for
(new) 1.00 0.50 0 Demand for
5 10 15 25
Quantity (millions of bars per week) Quantity demanded
Price (millions of bars per week) Quantity
per bar) Original New (millions of
bars per week) 0.50 22 32 1.00 15 25 6 1.50 10 20 10 2.00 7 17 13 2.50 5 15 15 0 Initially, the demand for energy bars is the blue demand
curve. The equilibrium price is $1.50 a bar, and the equilibrium quantity is 10 million bars a week. When more healthconscious people do more exercise, the demand for energy
bars increases and the demand curve shifts rightward to
become the red curve.
At $1.50 a bar, there is now a shortage of 10 million
bars a week. The price of a bar rises to a new equilibrium of
$2.50. As the price rises to $2.50, the quantity supplied
increases—shown by the blue arrow on the supply curve—to
the new equilibrium quantity of 15 million bars a week.
Following an increase in demand, the quantity supplied
increases but supply does not change—the supply curve does
animation 9160335_CH03_p053-080.qxd 6/22/09 8:56 AM Page 67 Predicting Changes in Price and Quantity We can now make our first two predictions: An Increase in Supply
When Nestlé (the producer of PowerBar) and other
energy bar producers switch to a new cost-saving
technology, the supply of energy bars increases.
Figure 3.9 shows the new supply schedule (the same
one that was shown in Fig. 3.5). What are the new
equilibrium price and quantity? The price...
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