Figure 3-8 Shifts in Demand and Supply Curves
change to be studied. We then determine the new equilibrium position
and compare it with the original one. The difference between the two
positions of equilibrium must result from the change that was introduced,
because everything else has been held constant.
The changes caused by each of the four possible curve shifts are shown in
Figure 3-8. Study the figure carefully. Previously, we had given the axes
specific labels, but because it is now intended to apply to any product, the
horizontal axis is simply labelled “Quantity.” This means quantity per
period in whatever units output is measured. “Price,” the vertical axis,
means the price measured as dollars per unit of quantity for the same
product.
Shifts in either demand or supply curves will generally lead to changes
in equilibrium price and quantity. In part (i), suppose the original
demand and supply curves are and S, which intersect to produce
equilibrium at with a price of and a quantity of An increase in
D 0
E 0 , p 0 Q 0.