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Understanding Market Equilibrium Changes: Supply and Demand Scenarios

Explore how changes in supply and demand affect market equilibrium using caviar as an example. See how price shifts as demand for a snooty appetizer increases and sturgeon populations decline. Learn about movement along supply and demand curves.

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Understanding Market Equilibrium Changes: Supply and Demand Scenarios

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  1. Supply and Demand: Changes in Equilibrium

  2. Change in Market Equilibrium: Change in Demand S --What if the price of escargot (another snooty appetizer) skyrocketed? $45 Demand for caviar increases… Price of caviar (per pound) $40 …which leads to movement along the supply curve to: higher equilibrium price and higher equilibrium quantity. $35 E2 $30 P2 E1 $25 P1 $20 $15 $10 $5 D2 D1 60 80 70 95 90 10 30 50 20 40 Q1 Q2 Quantity of caviar (millions of pounds)

  3. Change in Market Equilibrium: Change in Supply S2 --What if sturgeon (the fish whose eggs make escargot) populations declined? $45 Supply of caviar decreases… S1 Price of caviar (per pound) $40 $35 E2 $30 P2 …which leads to movement along the demand curve to: higher equilibrium price and lower equilibrium quantity. E1 $25 P1 $20 $15 $10 $5 D 60 80 70 95 90 10 30 50 20 40 Q2 Q1 Quantity of caviar (millions of pounds)

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