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Supply and Demand
ECONOMICS: Principles and Applications 3e
HALL & LIEBERMAN
© 2005 Thomson Business and Professional Publishing
Table 1 Demand Schedule for
Maple Syrup in the United States
03-102 table
Figure 1 The Demand Curve
Price per
Bottle
When the price is $4.00
per bottle, 40,000 bottles
are demanded (point A).
$4.00
A
B
2.00
At $2.00 per bottle,
60,000 bottles are
demanded (point B).
D
40,000
60,000
Number of Bottles
per Month
Table 2 Increase in Demand for
Maple Syrup in the United States
Figure 2 A Shift of the Demand
Curve
Price per
Bottle
An increase in income
shifts the demand curve for
maple syrup from D1 to D2.
At each price, more bottles
are demanded after the
shift
B
C
$2.00
60,000
D1
D2
80,000
Number of Bottles
per Month
Figure 3 Movements Along and
Shifts of the Demand Curve
(a)
Price
Price increase moves us
leftward along demand
curve
P2
Price increase moves us
rightward along demand
curve
P1
P3
Q2
Q1
Q3
Quantity
Figure 3 Movements Along and
Shifts of the Demand Curve
(b)
Price
Entire demand curve shifts
rightward when:
• income or wealth ↑
• price of substitute ↑
• price of complement ↓
• population ↑
• expected price ↑
• tastes shift toward good
D2
D1
Quantity
Figure 3 Movements Along and
Shifts of the Demand Curve
(c)
Price
Entire demand curve shifts
leftward when:
• income or wealth ↓
• price of substitute ↓
• price of complement ↑
• population ↓
• expected price ↓
• tastes shift toward good
D1
D2
Quantity
Table 3 Supply Schedule for
Maple Syrup in the United States
Figure 4 The Supply Curve
Price per
Bottle
When the price is $2.00
per bottle, 40,000 bottles
are supplied (point F).
$4.00
2.00
S
G
At $4.00 per bottle,
quantity supplied is
60,000 bottles (point G).
F
40,000
60,000
Number of Bottles
per Month
Table 4 Increase in Supply of
Maple Syrup in the United States
Figure 5 A Shift of the Supply
Curve
Figure 6 Changes in Supply and
in Quantity Supplied
(a)
Price
S
Price increase moves
us rightward along
supply curve
P2
P1
Price increase moves
us leftward along
supply curve
P3
Q3
Q1
Q2
Quantity
Figure 6 Changes in Supply and
in Quantity Supplied
(b)
Price
Entire supply curve shifts
rightward when:
• price of input ↓
• price of alternate good ↓
• number of firms ↑
• expected price ↑
• technological advance
• favorable weather
S1
S2
Quantity
Figure 6 Changes in Supply and
in Quantity Supplied
Price
Entire supply curve shifts
rightward when:
• price of input ↑
• price of alternate good ↑
• number of firms ↓
• expected price ↑
• unfavorable weather
(c)
S2
S1
Quantity
Figure 7 Market Equilibrium
Price per
Bottle
2. causes the price
to rise . . .
3. shrinking the
excess demand . . .
S
E
$3.00
1.00
H
4. until price reaches its
equilibrium value of $3.00
.
J
Excess Demand
D
1. At a price of $1.00 per
bottle an excess demand
of 50,000 bottles . . .
25,000 50,000 75,000
Number of Bottles
per Month
Figure 8 Excess Supply and
Price Adjustment
Price per
Bottle
1. At a price of $5.00 per
bottle an excess supply
of 30,000 bottles . . .
Excess Supply at $5.00 S
$5.00
2. causes the
price to drop,
3.00
3. shrinking the
excess supply . . .
L
K
E
4. until price reaches its
equilibrium value of
$3.00.
D
35,000 50,000 65,000
Number of Bottles
per Month
Figure 9 A Shift in Demand and a
New Equilibrium
Price per
Bottle
4. Equilibrium
price
increases
3. to a new
equilibrium.
S
$4.00
3.00
2. moves us along
the supply
curve . . .
F'
E
1. An increase in
demand . . .
D2
D1
5. and equilibrium quantity
increases too.
50,000 60,000
Number of Bottles of
Maple Syrup per Period
Figure 10 A Shift in Supply and a
New Equilibrium
Price per
Bottle
$5.00
3.00
S2
S1
E'
E
D
35,000 50,000
Number of Bottles
Figure 11 Changes in the Market
for Handheld PCs
Price per
Handheld
PC
3. moved the market to
a new equilibrium.
2. and a decrease
in demand . . .
4. Price
decreased . . .
A
$500
B
S2002
S2003
1. An increase in
supply . . .
$400
D2002
5. and quantity
decreased as well.
D2003
2.45 3.33
Millions of Handheld PCs
per Quarter
Table 5 Effect of Supply and Demand Shifts
on Equilibrium Price (P) and Quantity (Q)
Figure 12 The Market for Oil
Price per
Barrel of Oil
S2
S1
E'
P2
E
P1
D
Q2
Q1
Barrels of Oil
Figure 13 The Market for Natural
Gas
Price per Cubic
Foot of Natural
Gas
S
F'
P4
F
D2
P3
D1
Q3
Q4
Cubic Feet of
Natural Gas