If the change in demand is larger than the change in supply the price will rise

If the change in demand is larger than the change in

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same (panel B). If the change in demand is larger than the change insupply, the price will rise (panel A), and the price will drop when sup-ply increases more than demand (panel C).D1D1D1D0D0D0S0S0S0S1S1S10P1P0Q0Q1QuantityPricePanel AChange in Demand > Change in Supply0P0Q0Q1QuantityPricePanel BChange in Demand = Change in Supply0P1P0Q0Q1QuantityPricePanel CChange in Demand < Change in SupplyeecbeaFIGURE 15P0Q0QuantityPriceP0Q0QuantityPriceP0Q0QuantityPriceD0S0D0S0D0S02. See Figure 16 on the next page. In this situation both demand and sup-ply for cell phones decline, and output will fall. Again, what will happento equilibrium price is uncertain. If demand and supply decline at thesame rate, the price will remain the same (panel B). If the drop indemand is larger than the drop in supply, the price will fall (panel A),but if supply drops more than demand, price will rise (panel C).Chiang_3E_CT_Micro_CH03_Layout 1 12/17/13 2:32 PM Page 67
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68Chapter 33. See Figure 17. In this situation the supply of Toyotas declines becausean input into production costs more, but the development of the plug-in hybrid results in an increase in demand. In this case, price will clearlyrise, but what happens to equilibrium output is uncertain. If demandand supply change at the same rate, output will remain the same (panelB). If the increase in demand is larger than the drop in supply, outputwill rise (panel A), and if supply drops more than the increase indemand, output will fall (panel C).eceaebD2D2D2D0D0D0S0S0S0S2S2S20P0P2Q2Q0QuantityPricePanel AChange in Demand > Change in Supply0P0Q2Q0QuantityPricePanel BChange in Demand = Change in Supply0P0P2Q2Q0QuantityPricePanel CChange in Demand < Change in SupplyFIGURE 16eeecba0P2P0Q2Q0QuantityPricePanel AChange in Demand > Change in Supply0P0P2Q0QuantityPricePanel BChange in Demand = Change in Supply0P0P2Q2Q0QuantityPricePanel CChange in Demand < Change in SupplyD1D1D0D0D0D1S0S0S0S2S2S2FIGURE 174. See Figure 18. In this situation the supply of tape recorders increasesbecause of technology, but the demand declines, given the digitalalternatives. In this case, price will fall, but again, what happens toequilibrium output is uncertain. If demand and supply change at thesame rate, output will remain the same (panel B). If the drop indemand is larger than the increase in supply, output will fall (panelA), and if supply increases more than the decrease in demand, out-put will rise (panel C).Chiang_3E_CT_Micro_CH03_Layout 1 12/17/13 2:32 PM Page 68
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Supply and Demand69abeceeD2D2D0D0D0D2S0S0S0S1S1S10P2P0Q2Q0QuantityPricePanel AChange in Demand > Change in Supply0P0P2Q0QuantityPricePanel BChange in Demand = Change in Supply0P0P2Q2Q0QuantityPricePanel CChange in Demand < Change in SupplyFIGURE 18Market Equilibrium Quick CheckCircle the Correct Answer1. (T / F) Markets clear at the equilibrium price.
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