BSNS108 Lecture Notes - Economic Equilibrium

• School: University of Otago
• Department: Business Studies
• Course: BSNS108
• Professor: Helen Lu

Document Summary

Then: change in some things other than price cause: (increase in demand) and (increase in supply) We can predict that equilibrium quantity will be higher but, in general, we cannot predict whether equilibrium price will be higher or lower without knowing which shifts more, supply or demand. Increase in demand is greater than the increase in supply so price increases. Increase in demand is less than the increase in supply so price decreases. 0 initial equilibrium ( p0 , q0 ) Then: change in some things other than price cause: (increase in demand) and (decrease in supply) 1 new equilibrium ( p1 , q1 ) We can predict that equilibrium price will be higher but, in general, we cannot predict whether equilibrium quantity will be higher or lower without knowing which shifts more, supply or demand. Increase in demand is greater than the decrease in supply so quantity increases.