How shifts in demand and supply affect equilibrium Consider the market for pens. Suppose that the number of students who are allergic to the rubber used in pencil erasers 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 dropped sharply.

On the following graph, labeled Scenario 1, indicate the effect these two events have on the demand for and supply of pens.

Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.

Scenario 1

Scenario 1 10 O Supply Demand CO O 6 Supply PRICE (Dollars per pen) Demand 0 1 3 4 5 6 7 8 9 10 QUANTITY (Millions of pens)Scenario 2 10 O LO Supply Demand 6 Supply PRICE (Dollars per pen) Demand 0 0 1 2 3 4 5 6 7 8 9 10 QUANTITY (Millions of pens)