Linear supply and demand curves are shown in Figure 1.66, with price on the vertical axis.

(a) Label the equilibrium price p₀ and the equilibrium quantity q₀ on the axes.

(b) Explain the effect on equilibrium price and quantity if the slope, Δp∕Δq, of the supply curve increases. Illustrate your answer graphically.

(c) Explain the effect on equilibrium price and quantity if the slope, Δp∕Δq, of the demand curve becomes more negative. Illustrate your answer graphically.

Figure 1.66

P Supply Demand 9