Course Name: Introduction To Economics
Course Code: ECO101
DEMAND, SUPPLY & EQUILIBRIUM ANALYSIS (Part II)
Equilibrium Can Shift If:
• Demand Curve Shifts.
• Supply Curve Shifts.
• Both Shift.
This gives rise to eight possibilities. These eight possibilities can be summarized as following:
Points to note in these 8 possibilities:
1.Demand curve shifts: Whenever the demand curve shifts, the new equilibrium is achieved
by moving along the supply curve.
2.Supply curve shifts: Conversely, when the supply curve shifts, the new equilibrium is
attained by moving along the demand curve.
3.Simultaneous shifts: In cases where both the demand and supply curves shift, the
adjustment process involves moving first along the demand curve and then along the supply
curve.
Government's Role in Price-Determination & Equilibrium Analysis
Identification Problem:
- The identification problem arises when determining the shape and location of the demand
and supply curves is not fully known.
- It is challenging to ascertain whether a specific change in price and quantity is due to a shift
in the demand curve, the supply curve, or both.
Government Intervention:
- The government influences equilibrium through two primary interventions.
Course Code: ECO101
DEMAND, SUPPLY & EQUILIBRIUM ANALYSIS (Part II)
Equilibrium Can Shift If:
• Demand Curve Shifts.
• Supply Curve Shifts.
• Both Shift.
This gives rise to eight possibilities. These eight possibilities can be summarized as following:
Points to note in these 8 possibilities:
1.Demand curve shifts: Whenever the demand curve shifts, the new equilibrium is achieved
by moving along the supply curve.
2.Supply curve shifts: Conversely, when the supply curve shifts, the new equilibrium is
attained by moving along the demand curve.
3.Simultaneous shifts: In cases where both the demand and supply curves shift, the
adjustment process involves moving first along the demand curve and then along the supply
curve.
Government's Role in Price-Determination & Equilibrium Analysis
Identification Problem:
- The identification problem arises when determining the shape and location of the demand
and supply curves is not fully known.
- It is challenging to ascertain whether a specific change in price and quantity is due to a shift
in the demand curve, the supply curve, or both.
Government Intervention:
- The government influences equilibrium through two primary interventions.
