IB Economics Topic 2.3.2 Shifting Demand and Supply Curves to Produce a New Market Equilibrium Revision Notes (SL/HL)

IB Economics Topic 2.3.2 Shifting Demand and Supply Curves to Produce a New Market Equilibrium Revision Notes (SL/HL) | RevisionDojo

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At market equilibrium, both consumers and producers are satisfied and have no tendency to change their choices, unless there is a change in some non-price determinant.

Consider the market for some good $X$ (Figure 1). At first, it is in equilibrium at point $A$ with price $P_e$ and quantity $Q_e$.

Shifts in Demand

Now assume that there is a change in some non-price determinant, such as an increase in the price of a substitute of good $X$:

This will cause the demand for good $X$ to increase, shifting the curve to the right from $D_1$ to $D_2$ (Figure 2).
Hence, at the current price $P_e$, there is an excess demand from point $B$ to $A$ because the new quantity demanded $Q_1$ is higher than the quantity supplied $Q_e$ .
Thus (as we was in 2.3.1), the firm will increase its price until $P_1$ causing a new equilibrium point to be found at $C$ with quantity $Q_2$.

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Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

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At market equilibrium, both consumers and producers are satisfied and have no tendency to change their choices, unless there is a change in some non-price determinant.

Consider the market for some good $X$ (Figure 1). At first, it is in equilibrium at point $A$ with price $P_e$ and quantity $Q_e$.

Shifts in Demand

Now assume that there is a change in some non-price determinant, such as an increase in the price of a substitute of good $X$:

This will cause the demand for good $X$ to increase, shifting the curve to the right from $D_1$ to $D_2$ (Figure 2).
Hence, at the current price $P_e$, there is an excess demand from point $B$ to $A$ because the new quantity demanded $Q_1$ is higher than the quantity supplied $Q_e$ .
Thus (as we was in 2.3.1), the firm will increase its price until $P_1$ causing a new equilibrium point to be found at $C$ with quantity $Q_2$.

Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics

IB Economics 2.3.2 Shifting Demand and Supply Curves to Produce a New Market Equilibrium Notes

1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics

Shifts in Demand

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

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Shifts in Demand

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account