An existing supply curve and demand curve together determine an equilibrium level of output for the good (or service) and an equilibrium market price for the good. Whenever any non-price determinant of demand changes (shifting the demand curve) or non-price determinant of supply changes (shifting the supply curve) a new equilibrium point is created.

Regardless of what non-price determinant changes, the market follows the same process to find this new equilibrium. The "chain of events" that the market (in general) goes through is;

1. Change in demand or supply
2. A shortage or surplus is created
3. A change in price, causing a change in quantity demanded and quantity supplied (because either buyers or sellers are unhappy)
4. A new equilibrium is reached (because at the current market price, the quantity demanded is exactly equal to the quantity supplied)

Instructions: For the situation listed below, specifically describe what is happening as the market "moves" through each step of the chain of events as it seeks a new equilibrium both verbally and graphically. Downloading the chapter 10 lecture notes may assist you. Treat this as an essay in which each of the steps is specifically addressed using complete sentences. Do not forget to indicate whether the new equilibrium price and quantity is higher or lower. Below the questions are the formatting instructions for the assignment you are submitting.

1. There is a decrease in the price of an economic resource used to produce Mountain Dew.