Next, complete the following graph, labeled Scenario 2, by shifting the supply and demand curves in the same way that you did on the Scenario 1 graph. Scenario 2 10 Supply Demand Supply Demand 3 4 10 QUANTITY (Millions of pens) Compare both the Scenario 1 and Scenario 2 graphs. Notice that after completing both graphs, you can now see a difference between them that wasn't apparent before the shifts because each graph indicates different magnitudes for the supply and demand shifts in the market for pens. Use the results of your answers on both the Scenario 1 and Scenario 2 graphs to complete the folowing table. Begin by indicating the overall change in the equilibrium price and quantity after the shift in demand or supply for each shift-magnitude scenario. Then, in the final column, indicate the resulting change in the equilibrium price and quantity when supply and demand shift in the direction you previously indicated on both graphs. If you cannot determine the answer without knowing the magnitude of the shifts, choose Cannot determine. Change in Equilibrium Objects Equilibrium Object Scenario 1 Scenario 2 When Shift Magnitudes Are Unknown Price Quantity True or False: When both the demand and supply curves shift, the curve that shifts by the larger magnitude determines the effect on the undetermined equilibrium object. O True O False PRICE (Dollars per pen)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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13. How shifts in demand and supply affect equilibrium

Consider the market for pens. Suppose that the number of students with an allergy to pencil erasers increases, causing more students to switch from pencils to pens in school. Moreover, the price of plastic, an important input in pen production, has dropped considerably.

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

Next, complete the following graph, labeled Scenario 2, by shifting the supply and demand curves in the same way that you did on the Scenario 1
graph.
Scenario 2
10
Supply
Demand
Supply
5
4
3
Demand
2
1
3
4
5
10
QUANTITY (Millions of pens)
Compare both the Scenario 1 and Scenario 2 graphs. Notice that after completing both graphs, you can now see a difference between them that
wasn't apparent before the shifts because each graph indicates different magnitudes for the supply and demand shifts in the market for pens.
Use the results of your answers on both the Scenario 1 and Scenario 2 graphs to complete the following table. Begin by indicating the overall change
in the equilibrium price and quantity after the shift in demand or supply for each shift-magnitude scenario. Then, in the final column, indicate the
resulting change in the equilibrium price and quantity when supply and demand shift in the direction you previously indicated on both graphs. If you
cannot determine the answer without knowing the magnitude of the shifts, choose Cannot determine.
Change in Equilibrium Objects
Equilibrium Object
Scenario 1
Scenario 2
When Shift Magnitudes Are Unknown
Price
Quantity
True or False: When both the demand and supply curves shift, the curve that shifts by the larger magnitude determines the effect on the
undetermined equilibrium object.
True
O False
PRICE (Dollars per pen)

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