First Question:

1. What are the pre-shift and post-shift equilibrium prices for a sandwich? Will an increase in quantity supplied at every price always result in a lower equilibrium price? Why?

2. Imagine that instead of an increase in supply, there is a decrease demand. How will the equilibrium price change? Why?

ECONOMICS For more on interpreting graphs, see SKILLBUILDER the Skillbuilder Handbook, page R29. saysful (sa) Interpreting Graphs: Shifting Curves Graphs show statistical information in a visual manner. A graph that shows a shifting curve should immediately alert the reader to one of the following: a change in napabribeidnto. quantity demanded at every price, or a change in quantity supplied at every price. In Figure 6.9, a change in the number of producers has caused an increase in supply at every price. The sandwich shop across the street from Forest View High School now has a competitor. TECHNIQUES FOR ANALYZING SHIFTING CURVES Use the following strategies, mundilis along with what you learned throughout Section 1, to analyze the graph. wort badw Use the annotations to find Use the title key elements of the graph. to identify the Annotation @ shows the main idea of the equilibrium price where curve graph. If supply has shifted, $1 meets curve D. FIGURE 6.9 SHIFT IN SUPPLY OF SANDWICHES then we know that quantity S1 a This is the initial supplied at equilibrium price. very price has either increased b Curve shifts to or decreased. the right. A C This is the new equilibrium price. Price (in dollars) w Notice that 6 shows a shift 2 to the right. An increase in supply Read the axis always shows a rightward shift; a labels carefully. decrease in supply always causes a D When both quantity leftward shift. supplied and Notice the new equilibrium price, demanded are 20 40 60 80 100 120 . An increase in supply results in present, look for an Quantity of sandwiches demanded a lower equilibrium price. intersection to find and supplied equilibrium price. THINKING ECONOMICALLY Analyzing 1. What are the pre-shift and post-shift equilibrium prices for a sandwich? Will an price? Why? increase in quantity supplied at every price always result in a lower equilibrium 2. Imagine that instead of an increase in supply, there is a decrease in demand. How will the equilibrium price change? Why?Finding Equilibrium Price Suppose that you are a manufacturer of a new mini refrigerator for col- lege dorm rooms. You expect your product to be popular because of its compact size and high tech design. After a few weeks in the market you are able to develop the following market demand and supply schedule. Price per Refrigerator Quantity Quantity ($) Demanded Supplied 225 500 6,000 200 1,000 4,500 175 1,500 3,500 150 2,500 2,500 125 4,000 1,500 Create a Demand and Supply Curve Use this market demand and supply schedule to create a market demand and supply curve and deter- mine the equilibrium price. Challenge Calculate surplus or shortage at every price and suggest ways the manufacturer could try to eliminate the surplus and raise the equilibrium price