2.3.2—Changes in equilibrium

A change in a demand or supply determinant shifts a curve and creates a new equilibrium price and quantity.

The direction depends on which curve shifts and whether the movement changes price, quantity or both.

Name the shift, predict the new intersection and explain the adjustment path.

A heatwave shifts demand for cold drinks right, raising equilibrium price and quantity if supply slopes upward.

Do not shift a curve for a change in the good’s own price.

After a rightward demand shift, the old price creates excess demand because $Q_d>Q_s$; competition among buyers raises price, quantity supplied expands along supply and quantity demanded contracts along the new demand curve until a new equilibrium is reached. After a rightward supply shift, the old price creates excess supply because $Q_s>Q_d$; sellers reduce price until the new intersection is reached. State both the initial disequilibrium and adjustment, not only the final arrows.