Professional Documents
Culture Documents
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Changes in technology
If technology improves would the supply curve shift
to the right or the left? Sketch a graph to help you
prove your opinion
Input costs
If the price of inputs (raw materials) goes up what
will happen to supply? – Sketch a graph ....
Government regulation
What will happen to the supply curve if the Government
improves health and safety legislation – Sketch a graph
...
Equilibrium price is the price at which the
quantity supplied equals the quantity
demanded
It is where the DEMAND and SUPPLY
curve CROSS
This happens when demand for a good
exceeds the amount being supplied
Some buyers will be frustrated because
of the shortage
They will offer MORE MONEY for the
good
Price will rise
The MARKET will CLEAR and move to
EQUILIBRIUM PRICE
Price
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D
Pe
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Qs Qe Qd
If the quantity supplied exceeds the
quantity demanded sellers have unsold
stock
This is excess supply
Sellers will reduce price to get rid of the
unsold stock (a sale)
The MARKET will CLEAR – return to
equilibrium
Use the graph to show a shortage to
help you
Price
S
D
Pe
0 Quantity
Qd Qe Qs