In the case of a shifting demand curve, since the supply curve is generally upward sloping, a shift of the demand curve either Will the equilibrium quantity increase or decrease? Will theĮquilibrium price increase or decrease? Will the shift in the equilibrium point be more of a change in price or a change in quantity? The examination of the impact of a change on theĮquilibrium point is known in economics as comparative statics. It is often of interest to determine the impact of a changing factor on the market equilibrium. Since the cost of producing a gallon of gasoline will increase, the marginal cost of gasoline will increase at any level of production and the result will beĪn upward shift in the supply curve. As another example, consider the supply curve for gasoline after an That at any market price for the existing good, demand will be less than it was prior to introduction of the substitute. In the case of the new availability of a close substitute for an existing product, we would expect the demand curve to shift to the left, indicating The impact of these persistent changes can be viewed in the context of changes in the behavior of buyers or the operations of sellers that cause a shift in the demandĬurve or the supply curve, respectively.
For example, if a new product becomesĪvailable that is a viable substitute for an existing product, there is likely to be either a persistent drop in the quantity consumed of the existing good or a reduction in the market priceįor the existing good.
In addition to the factors that cause fluctuations in the market equilibrium, some developments may lead to sustained changes in the market equilibrium.
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