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There are many factors that can directly affect supply and demand and indirectly affect price and quantity. In the first column we identify a change
There are many factors that can directly affect supply and demand and indirectly affect price and quantity. In the first column we identify a change in a given factor. How does the change in the factor affect supply or demand? How does it affect price and quantity? Draw an upward arrow () in the demand column if demand rises and a downward arrow () if demand falls. The same holds for supply, equilibrium price, and equilibrium quantity.
Factor | Demand | Supply | Equilibrium Price | Equilibrium Quantity |
Price of a substitute rises | ||||
Price of a compliment falls | ||||
Income rises (normal good) | ||||
Income falls (inferior good) | ||||
Price of relavant resource rises | ||||
Technology advances | ||||
Quota | ||||
Number of buyers rises | ||||
Number of sellers rises | ||||
Buyers expect higher price | ||||
Sellers expect higher price | ||||
Tax on production | ||||
Preferences become more favorable with respect to the good |
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