Question

Think of a relevant example in your own life of how a change in the market (including information, preferences, technology, price of alternative goods, regulations, taxes, etc.) has shifted either the supply or demand of a good. How did this change affect the market equilibrium for that good or service? Explain.

Answer 1

Suppose government increases taxes on fast food (say, burgers) . This means that the price for producing burgers increases. This will shift the supply curve for burgers to the left. As a result, demand conditions remaining the same, equilibrium price of burgers will increase while, equilibrium quantity of burgers will decrease.

Again, suppose price of a substitute good falls (say, tacos). Then, quantity demanded for tacos will rise while, quantity demanded for burgers will fall. This will shift the demand curve for burgers to the left. As a result, equilibrium price of burgers and equilibrium quantity of burgers both will decrease.