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CH 03
CH 03
Price per
Bottle When the price is $4.00
per bottle, 40,000
bottles are demanded
(point A).
A
$4.00
At $2.00 per bottle,
60,000 bottles are
B
2.00 demanded (point B).
1
Fig. 2 A Shift of the Demand
Curve
An increase in income
shifts the demand curve
Price per for maple syrup from D1
Bottle to D2. At each price, more
bottles are demanded
after the shift.
B C
$2.00
D1 D2
P3
Q2 Q1 Q3 Quantity
3
Fig. 3(b) Movements Along and
Shifts of the Demand Curve
Price
Entire demand curve shifts
rightward when:
• income or wealth ↑
• price of substitute ↑
• price of complement ↓
• population ↑
• expected price ↑
• tastes shift toward good
D2
D1
Quantity
4
Fig. 3(c) Movements Along and
Shifts of the Demand Curve
Price
Entire demand curve shifts
leftward when:
• income or wealth ↓
• price of substitute ↓
• price of complement ↑
• population ↓
• expected price ↓
• tastes shift toward good
D1
D2
Quantity
5
Fig. 4 The Supply Curve
Price per When the price is $2.00
Bottle per bottle, 40,000 bottles
S
are supplied (point F).
$4.00 G
P2
P1
Price increase moves
us leftward along
P3 supply curve
Q3 Q1 Q2 Quantity 8
Fig. 6(b) Changes in Supply and in
Quantity Supplied
9
Quantity
Fig. 6(c) Changes in Supply and in
Quantity Supplied
Price
Entire supply curve shifts S2
rightward when: S1
• price of input ↑
• price of alternate good ↑
• number of firms ↓
• expected price ↑
• unfavorable weather
10
Quantity
Fig. 7 Market Equilibrium
E
4. until price reaches its
$3.00 equilibrium value of $3.00
.
H
1.00 J
Excess Demand
D
25,000 50,000 75,000 Number of Bottles
1. At a price of $1.00 per
per Month
bottle an excess demand
of 50,000 bottles . . .
11
Fig. 8 Excess Supply and Price
Adjustment
1. At a price of $5.00 per
Price per bottle an excess supply
Bottle of 30,000 bottles . . .
D
35,000 50,000 65,000 Number of Bottles
per Month
12
Fig. 9 A Shift in Demand and a
New Equilibrium
4. Equilibrium 3. to a new
Price per price equilibrium.
Bottle increases
2. moves us along
S the supply
curve . . .
$4.00 F'
1. An increase in
E demand . . .
3.00
D2
D1
$5.00 E'
3.00 E
E'
P2
P1 E
Q2 Q1 Barrels of Oil
17
Fig. 14 The Market for Natural Gas
F'
P4
F
P3 D2
D1
Q3 Q4 Cubic Feet of
Natural Gas
18