ECON 202 1st Edition Lecture 4 Outline of Last Lecture II What Shifts the Demand Curve III Law of Demand IV What is the demand curve telling us V Introducing Supply Outline of Current Lecture VI Equilibrium VII Shifts in Equilibrium Current Lecture Equilibrium where the quantity supplied equals the quantity demanded The market price for coffee is 2 and the QD is 50 cups of coffee and the QS is five cups of coffee thus leading us to have a shortage of 45 cups of coffee There are going to be 45 people who wanted a cup of coffee at that price this could potentially lead to people willing to pay a higher price for the good at hand this is on the demand side Suppliers could potentially look to raise their prices and offer their goods for more money this is happening on the supplier side Shortages create market pressure to raise the price The higher price or cost 6 QuantityDemanded 2 Quantity Supplied 60 These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute This creates a surplus of 58 cups of coffee On the producers side they will be willing to lower their cost or price they will be more willing to drop the costs Consumers will begin to offer lower prices This causes movements down the demand and supply curves to create a new equilibrium price These two scenarios are potential factors that occur when finding the equilibrium point in a market What happens when we throw in market shifters Demand will shift when something causes the consumers to want the product more than previously before The price will not change immediately but the demand curve has shifted outwards The quantity supplied stays exactly where it was but right after the demand shifts there will be an immediate shortage where there is not enough quantity supplied is less than the quantity demanded In this period during a shortage will push the suppliers and consumers to meet on a equilibrium price When demand shifts outwards it will increase the price and supply If something becomes more popular the quantity and price will increase because of a shift in demand When demand increases so will supply and price everything increases The Supply Curve shifts outward This shift leads to an immediate surplus when Quantity Demanded Quantity Supplied What happens when we have a shift in BOTH curves Both demand and supply increase With an increase in supply there was an increase in quantity and an increase in demand led to increase quantity as well this conflicts how price is affected The shift in supply lead to price decreasing and the shift in demand lead to an increase in price Opposite Shifts Supply increases Quantity Increases Prices Decrease Demand Decreases Quantity Decreases Price Decreases Quantity Examine each shift individually and then look at them together It is recommended to draw out the graphs to have a better understanding of what is happening in the situation Do this on the tests Real World Situations Gas prices have decreased The supply of gasoline has increased due to the input prices meaning it has become cheaper to produce gasoline because the cost of crude oil has also become cheaper Gas prices are tied to crude oil prices BOTH curves shift Supply has increased due to the fracking industry in the United States more wells and more drilling Supply and Demand in a real world situation