How an Increase in Demand Affects the Equilibrium ‘An event that raises quantity demanded at any given price shits the demand curve to the right. The equilbrium price and the equilibrium (quantity both rise, Here, the report linking using rape seed oil to reductions in risk of il health causes buyers to demand more rape seed. The demand curve shifts from D, to Dz, which causes the equilibrium price wo rise from £200 to €3.00 and the equilibrium quanti to rise from 12000 10 200000 tonnes. Price of raposoad 550 pertonne 1. Reporton positive affects of rape seed all 50 increases demand. 50 0 | supply 1. ...hich puts pressure ‘on prices to rise which --~ encourages suppliers to offer mare forsale. 2...which causes a — shortage inthe BeBe eB 100 | 050 TEesCUNNBBNRABB Dw ‘Quanity bought and so (00s tonnes)FIGURE 4.10 How a Decrease in Supply Affects the Eq rium An event that reduces supply at any given price shits the supply curve to the left The equifbrium price rises, and the equilibrium quantity falls. Here, an increase in the price of seed for growing rape plants (an input) ceuses sellers to supply less rape seed. The supply curve shifts from $; to Sz, which causes the equilibrium price of rape seed to rise from £200 to £2.50 and the equilibrium quantity to fall fom 12000 to 9000 tonnes. Prica of rape seed 559 por tonne TeCTUNMB MNS WD _ ‘Quantity Bought and Ea _FIGURE 4.12 A Shift in Both Supply and Demand (i) Mere: 20sin, we observe a simultaneous increase in demand ard supply. Three outcomes are possible. In pane! (a) the equim price rex ‘nom P.to Ps and the caulrivm quarry rises fom Q, tds I panel (b) the aqumbeian price fas trom P, to Ps but the eQulbiam Quareny ‘isos from G; % Qs pane! (c), more 6 no change to te e@umbriun price but to squab quontty rises Wom Qt Qs »A Shift in Both Supply and Demand (i) ‘Hore we obsewe a simultaneous inrease in domand and decrease in supply. Two outcomes ae possible, In pane a, the equléium price rises frm P, to P and the equilibrium quantity rises from Q, to In panel (the equivum price again rises from P, to P,, but ‘the equilibrium quantity fall from 0, to Qo. (al Pie rises, quantity ses Price of rape ood per tome Ko ‘ntl euitrum uantty bought and sold (0) Prog rises, quantity fls Price of 5 rapes pertome Initia quia G+ Cuantty bought and soldWhat Happens to Price and Quantity When Supply or Demand Shifts? ‘As quick qui, make sure you can explain each ofthe enti inthis table using a supply and demand diagram. No change An increase A decrease in supply in supply in supply No change in demand P same Pdown Pup Osame Qup Qdown An increase in demand P up Pambiguous Pup up Qup ambiguous ‘A decrease in demand —P down Pdown P ambiguous Odown Qambiguous Q down