Consider the market for umbrellas. Suppose the quantity of umbrellas demanded by consumers (Q _D ) depends on the price of an umbrella (P) and the percentage chance of rain (R) forecasted by the local news station. Similarly, the quantity of umbrellas supplied by producers (Q _S ) depends on the price of an umbrella (P) and the square-foot price of waterproof nylon (N) used in the production of umbrellas.

The following two graphs depict the market for umbrellas in two separate regions. Suppose the chance of rain Increases to 90% in both regions. On each of the graphs, show the effect this has on the market for umbrellas by shifting the demand curve, the supply curve, or both.

In both markets, this change in the weather forecast causes the equilibrium quantity to ____________ equilibrium price to _________________________

You can see that although the affected curve shifted by the same amount in both markets, the effect on the equilibrium price is greater in the market with more ___________ supply.

PRICE (Dollars per umbrella) PRICE (Dollars per umbrella) Supply QUANTITY (Umbrellas) Supply QUANTITY (Umbrellas)