Question

Identify a good you commonly use or would like to use. Explain at least three factors that would result in a shift in the demand curve for that good and three factors that would result in a shift in the supply curve for that good. Describe the effect on equilibrium price and quantity of each factor. Finally, explain how the shifts in demand and supply are different from movements along the demand curve or movements along the supply curve and why the distinction is important.

Answer 1

Iphone

Shifts in demand could be due to:
a) Change in price of Macbook
b) Change in price of Samsung Mobile
c) Economic recesion or boom

Shifts in supply could be due to:
a) Change in input cost
b) Technological improvement
c) Another apple product becoming more profitable

Shift in demand to the right would increase price and quantity
Shift in demand to theleft would decrease quantity and increase price

Shift in supply to the right would reduce price but increase quantity.
Shift in supply to the left would increase price but reduce quantity.

Movement along a curve means that all other factors are constant except for price. That distinction is important because it defines whether the change in quantity demanded is due to price factor or non-price factor.

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