<2.6 PRICE CHANGES> 

• An INCREASE IN DEMAND results in a RIGHTWARD SHIFT OF THE DEMAND CURVE from D1 to D2, which will create a SHORTAGE at the original price of x-z, as a result the PRICE is 'BID UPWARDS'. This rise in price INCENTIVISES current producers (and new producers attracted by the higher prices to enter) leading to an INCREASE THE QUANTITY SUPPLIED (In accordance with the LAW OF SUPPLY), which is seem by a MOVEMENT UP THE SUPPLY CURVE. As the price rises some consumers leave the market due to their unwillingness to pay the higher prices causing a MOVEMENT UP THE DEMAND CURVE. A new equilibrium price and quantity is reached at 

• Using the same structure as the text above explain how a DECREASE IN DEMAND eventually leads to a LOWER EQUILIBRIUM PRICE and QUANTITY. Use a real world example.

• An INCREASE IN SUPPLY results in a RIGHTWARD SHIFT OF THE SUPPLY CURVE from S1 to S2, which will create a SURPLUS at the original price of x-z, as a result the PRICE is 'DISCOUNTED DOWNWARDS'. This fall in price INCENTIVISES current producers (and new producers to leave the market) leading to an DECREASE THE QUANTITY SUPPLIED (In accordance with the LAW OF SUPPLY), which is seem by a MOVEMENT DOWN THE SUPPLY CURVE from x to y. As the price falls some consumers enter the market due to their willingness to pay the lower prices causing a MOVEMENT DOWN THE DEMAND CURVE from z to y. A new equilibrium price and quantity is reached at 

• Using the same structure as the text above explain how a DECREASE IN SUPPLY eventually leads to a HIGHER EQUILIBRIUM PRICE and a LOWER QUANTITY. Use a real world example.

Sketch the appropriate diagram for each of these scenarios and show how price and quantity transacted changes. 

--If⬆️D > ⬆️S--

--If⬆️D < ⬆️S--

--If⬇️D > ⬇️S--

--If⬇️D < ⬇️S--