Madeline in ECONOMICS NOTES (Files) · Edit Doc
Panel A - Ebilibrium represents when suppliers and consumers agree on a number of product to produce and how much it will get sold for.
Panel B - Look at this like there is a new item that everybody wants. The demand has shifted to the right. Even though everyone wants this item, the availibility, or according to the graph, supply, hasn't changed, so Price goes up and quantity demanded goes up as well.
Panel C - See this like that item everyone wanted has just gone out of style. Supply of it stays the same, but demand has LEAPED to the left. The price of the item decreases and the quantity demanded as well.
Panel D - Say availibility of cotton has increased so suppliers are making more dresses. The supply has shifted to the right. the overabundance has caused price to decrease and amount supplied to increase.
Panel E - So supply and demand have both shifted to the right. Since supply has increased and demand has increased, the quantity of both has increased. but when you get them both shifted to the right, the price is indeterminate, or, can't be determined by the graph.
Panel F - Supply increased and Demand decreased. when supply increases, the price decreases, as we've seen in graph D. But when Demand is decreased, price goes down as we've seen before as well. over all, the price decreases and we cant determine quantity from this graph. so if the supply shifts to the right and demand to the left, price decreases and quantity is indeterminate.
Panel G - Say there is a ban from using too much cotton to make products. so manufacturers cant make as many dresses. the supply has fallen but demand has stayed constant. since it would be harder to obtain a dress, the price goes up and quantity supplied goes down.
Panel H - demand goes up, supply goes down. refer to panel f. we've seen when the lines go in two different directions, quantity cant be determined from the graph. this is true for this graph. quantity is indeterminate but instead of price going down, price goes up because demand is up and supply is down.
Panel I - supply is down and demand is down. refer to panel E. remember when the lines shifted in the same direction and you couldnt determine the price? same here, only since the lines shifted to the left, quantity demanded and quantity supplied are down.
let me know if this doesnt make sense.
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