16. How shis in demand and supplyI affect equilibrium Consider the market for pens. Suppose that the number of students who are allergic to the rubber used in pencil elasers increases, leading more students to switch from pencils to pens in school. Further, the price of ink, a major input in the pen production process, has increased sh arply. On the following graph, labelled Scenario 1, indicate the e'ect these two events have on the demand for and suppiy of pens. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you tr}:r to move a curve and it snaps back to its original position, just drag it a little farther. Scenario 1 / 0 S | upp Demand Supply 5 -- P FICE (D ollars per pen) Demand a. _________.+ QUANTITY [Millions of pens] Next, complete the foifowr'ng graph, labeled Scenario 2, by shifting the suppiy and demand curves In the same way that you did on the Scenario 1 graph. Scenario 2 10 0 9 Su | 8 pp Demand E 3 b E 3099\" Q. E 5 _______.+ a I D .4 4 I E I E 3 I I Demand 2 I I 1 I I 0 I D 1 2 3 4 5 5 7 a 9 10 QUANTITY [Millions ol pens] Compare both the Sce narid 1 and Scenario 2 graphs. Notice that after completing both graphsr you can now see a diFferen ce between them that wasn't apparent before the shifts because each graph indicates different magnitudes For the supply and demand shifts in the market for pens. Use the results of your answers on both the Scenario 1 and Scenario 2 graphs to complete the following table. Begin by indicating the overall Change in the equilibrium price and quantity after the shift in demand or supply for each shift-magnitude scenario. Then, in the final column, indicate the resulting change in the equilibrium price and quantity when supply and demand shift in the direction you previously indicated on both graphs. If you cannot determine the answer without lmowing the magnitude of the shift, choose Cannot determine. Change in Equilibrium Objects Equilibrium Object Scenario 1 Scenario 2 When Sh ilt Magnitudes Are Unknown Price 7 V V Quantity 7 V V True or False: When both the demand and supplyI curves shi, you can always determine the effect on price and quantityI without knowing the magnitude of the shis. 0 True 0 False