Avoiding Mistakes




If you follow the logical sequence listed you should be able to avoid mistakes in analyzing changes in supply and demand.

  1. Initial equilibrium. Draw the supply and demand curves labeling the initial price and quantity.
  2. Events and shifts.  Analyze the event and ask yourself if it would increase or decrease supply or demand if the price does not change.
  3. Shortage or surplus?  If the initial price does not change, will there be a shortage or a surplus?
  4. Draw the shortage or surplus.
  5. New equilibrium.  The new equilibrium will be where the new supply and/or demand curves intersect.


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