Copyright © 2011 Cengage Learning 4 The Market Forces of Supply and Demand.

Copyright © 2011 Cengage Learning

44The Market Forces of Supply and Demand


Figure 1 Sabine’s Demand Schedule and Demand Curve



Figure 2 Market Demand as the Sum of Individual Demands


Figure 3 Shifts in the Demand Curve

Price ofice cream

cornets

Quantity ofice cream cornets

Increasein demand

Decreasein demand

Demand curve, D3

Demandcurve, D1

Demandcurve, D2

0


Table 1 Variables That Influence Buyers


Copyrigt©2010 CengageCopyright © 2011 Cengage

Figure 4 Shifts in the Demand Curve versus Movements Along the Demand Curve



Figure 5 Häagen’s Supply Schedule and Supply Curve



Figure 6 Market Supply as the Sum of Individual Supplies


Figure 7 Shifts in the Supply Curve

Price ofice cream

cornets

Quantity ofice cream cornets

0

Increasein supply

Decreasein supply

Supply curve, S3

curve, Supply

S1Supply

curve, S2


Table 2 Variables That Influence Sellers


Figure 8 The Equilibrium of Supply and Demand

Price ofice cream

cornets

0 1 2 3 4 5 6 7 8 9 10 11 12Quantity of ice cream cornets

13

Equilibriumquantity

Equilibrium price Equilibrium

Supply

Demand

€ 2.00


Figure 9 Markets Not in Equilibrium (1)

Price ofice cream

cornets

0

Supply

Demand

(a) Excess supply

Quantitydemanded

Quantitysupplied

Surplus

Quantity ofice cream

cornets

4

€ 2.50

10

2.00

7


Figure 9 Markets Not in Equilibrium (2)

Shortage

Price ofice cream

cornets

0

Supply

Demand

(b) Excess demand

Quantitysupplied

Quantitydemanded

Quantity ofice cream

cornets

4

€ 2.00

10

1.50

7



Equilibrium

• Surplus• When price > equilibrium price, then quantity

supplied > quantity demanded. • There is excess supply or a surplus.

• Suppliers will lower the price to increase sales, thereby moving toward equilibrium.


Table 3 A Three-Step Programme for Analysing Changes in Equilibrium


Figure 10 How an Increase in Demand Affects the Equilibrium

Price ofice cream

cornets

0 Quantity of ice cream cornets

Supply

Initialequilibrium

D

D

3. . . . and a higherquantity sold.

2. . . . resultingin a higherprice . . .

1. Hot weather increasesthe demand for ice cream . . .

2.00

7

New equilibrium€ 2.50

10


Figure 11 How a Decrease in Supply Affects the Equilibrium

Price ofice cream

Cone

0 Quantity of ice cream Cones

Demand

Newequilibrium

Initial equilibrium

S1

S2

2. . . . resultingin a higherprice of icecream . . .

1. An increase in theprice of sugar reducesthe supply of ice cream. . .

3. . . . and a lowerquantity sold.

2.00

7

€ 2.50

4



Figure 12 A Shift in Both Supply and Demand (i) (1)



Figure 12 A Shift in Both Supply and Demand (i) (2)



Figure 13 A Shift in Both Supply and Demand (ii) (1)








Table 4 What Happens to Price and Quantity When Supply or Demand Shifts?


Copyright © 2011 Cengage Learning 4 The Market Forces of Supply and Demand.

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