PM Sun Apr 14 Change in Supply and Equilibrium Price Now let's consider how changes in supply might affect equilibrium price. Recall that a change in supply occurs when something in the market prompts producers to offer different amounts for sale at every price. Remember from Chapter 5 that the six factors that can change supply are input costs, productivity, technology, government action, producer expectations, and number of producers. In Figures 6.6 and 6.7, the intersection of the supply curve ($1) and the demand curve (D) shows an equilibrium price of $75, with quantity supplied and demanded of 3,000 pairs of shoes. If the price of the raw materials needed to produce athletic shoes increases, the result is a decrease in supply of these shoes at every price. Study figure 6.6 and 6.7 below to address the questions that follow FIGURES 6.6 AND 6.7 CHANGES IN SUPPLY AND EQUILIBRIUM PRICE FIGURE 6.6 DECREASE IN SUPPLY FIGURE 6.7 INCREASE IN SUPPLY 125 125 $3 100 100 75 75 b- Price per pair (in dollars) Price per pair (in dollars) 50 50 25 25 D 0 0 2 3 4 5 6 2 3 4 5 6 Quantity of shoes (in thousands) Quantity of shoes (in thousands) ANALYZE GRAPHS 1. What happens to the quantity supplied at $100 when supply decreases? What happens to quantity supplied at $100 when supply increases? 2. How do these graphs illustrate the relationship between change in supply and change in equilibrium price? Application 3. If one of the three pizza parlors in your neighborhood closes, what will happen to the supply of pizza? How will that affect the equilibrium price of pizza