Changes in Supply and Demand

Read this article to learn more about how changes in supply and demand affect the market price equilibrium. Make sure to answer the "Try It" questions.

Changes in Supply and Demand

Answer to Try It

1.

    • an increase in the quantity demanded Correct.
      Lower input prices will shift the supply curve to the right, causing movement along the original demand curve to a new equilibrium.
    • a decrease in demand
      This is incorrect. An increase in the demand can only occur when the demand curve shifts. Inputs prices only shift the supply curve.
    • an increase in demand
      This is incorrect. An increase in demand can only occur when the demand curve shifts. Input prices only shift the supply curve.

2.

    • only a decrease in the quantity demanded
      This is incorrect. A movement along a demand curve, resulting in a change in quantity demanded, is always caused by a shift in the supply curve.
    • only an increase in the quantity demanded
      This is incorrect. A movement along a demand curve, resulting in a change in quantity demanded, is always caused by a shift in the supply curve.
    • an increase in demand
      Correct. Changing tastes will result in a shift of the demand curve to the right, so that a greater quantity is demanded at any given price.

3.

    • an increase in the quantity supplied
      Correct. The rightward shift in the demand curve caused by the extra income will result in movement along the supply curve and therefore an increase in quantity supplied.
    • anly an increase in quantity demanded
      This is incorrect. The extra income will shift the demand curve, causing movement along the supply curve and a change in quantity supplied.
    • an increase in supply
      This is incorrect. The extra income will shift the demand curve, causing movement along the supply curve and a change in quantity supplied.

4.

    • a decrease in demand
      This is incorrect. Higher input prices will cause the supply curve to shift, not the demand curve. The result is ultimately a decrease in the quantity demanded.
    • anly a decrease in the quantity supplied
      This is incorrect. A change input prices will shift the supply curve, not the demand curve. Changes in quantity supplied are caused by shift of the demand curve.
    • a decrease in supply
      Correct. Higher input prices will cause the supply curve to shift leftwards, resulting in movement along the demand curve and a new equilibrium.