Restoring Market Equilibrium

Question 1

rules for diagram

Answer 1

• border
• title
• contraction expansion
• arrows to show shift
• shortage or surplus at the bottom of the graph with the <>
• enough space
• big diagram
• y axis (price)
• x axis (quantity)
• MUST BE A TRIANGLE

Question 2

STEP 1

Answer 2

Assume that the market is initially in equilibrium at E1, where D intersects S. This occurs at price PE1 and quantity QE1, where Qd and Qs are equal.

Question 3

Step 2

Answer 3

Assume that there’s a change in the market such as a change in taste and preference in favor of apples. This causes an increase in the demand for apples, resulting in a rightward shift of the demand curve from D1 to D2.

Question 4

STEP 3

Answer 4

At the initial equilibrium price (PE1), Qd is now greater than Qs. This results in disequilibrium, known as a shortage.

Question 5

STEP 4

Answer 5

To eliminate the shortage, price increases, resulting in an expansion along the supply curve and a contraction along the demand curve.

Question 6

STEP 5

Answer 6

Equilibrium is restored at E2, where D2 intersects S. This occurs at a higher price (PE2) and a higher quantity (QE2). .