Shift of DD and SS

Question 1

Shortage (Increase DD)

Answer 1

1. Identify the factor, causes increase in DD, rightward shift of DD curve
2. At original price, there’s shortage.
3. Consumers compete for limited qty, offer higher prices, profit-maximizing producers increase supply.
4. Upward pressure on P causes movement along DD1 and SS0
5. Until equilibrium, eqm price and eqm qty increase

Question 2

Surplus (Increase SS)

Answer 2

1. Identify factor, causes increase in SS, rightward shift of SS curve
2. At original price, there’s surplus
3. Producers lower price to sell excess stock
4. Downward pressure on P causes movement along DD0 and SS1
5. Until equilibrium, eqm price decrease, eqm qty increase

Question 3

Simultaneous shift

Answer 3

1. Identify and explain factors changing DD and SS
2. Diagram
3. Determinate and indeterminate (Price + Qty)
4. Justification for likely outcome
5. Price adjustment process

(5) To determine surplus/shortage, look at orginal Px to new DD and SS curve

Question 4

Non-price determinant (Demand)

Answer 4

EGYPT

Expectation of future Px (Consumer)
Govt. policy
Y (Income) [Normal vs inferior good]
Price of related goods [ Substitutes, Compliments ,Derrived(FOP) ]
Taste + Preference

Question 5

Non-price determinant (Supply)

Answer 5

WETPIGS

Weather Conditions (Agriculture)
Expectations of furture Px (Producer)
Technology
Price of other goods (Competitive, Joint)
Input Px (Price of FOP)
Govt. policy
Sellers (More sellers, more supply)