Lesson preview · Market Equilibrium
Changes from a Single Shift
~7 min · Free to read
Equilibrium isn’t a fixed destination — it’s a moving target. Every demand or supply shift moves the market to a new and . The trick is learning to predict which way they go without re-drawing the whole graph each time. There’s a single rule that handles every case.
Key Term
The Master Rule
Demand shifts → and move TOGETHER (same direction). Supply shifts → and move APART (opposite directions).
This single rule handles every single-shift problem.
Key Term
Shift Direction Cheat Sheet
Demand shifts RIGHT (↑): , Demand shifts LEFT (↓): , Supply shifts RIGHT (↑): , Supply shifts LEFT (↓): ,
Why does it work this way? A rightward demand shift creates a shortage at the old price; the price rises and we slide UP the supply curve until it clears. A leftward supply shift also creates a shortage; the price rises but now we slide UP the (unchanged) demand curve, which means falls. Different curve, opposite direction for .
Trap · Common Misconception
'Prices rose, so demand must have gone up' — be careful!
A rising price can come from EITHER a right shift in demand OR a left shift in supply. You can’t tell from price alone — check what happened to QUANTITY. If rose, it was demand. If fell, it was supply. This is the most common trap on exams.
Tip
The 4-Question Drill
For any scenario: 1. Which side of the market does this affect — buyers (demand) or sellers (supply)? 2. Does it make that side want MORE or LESS at every price? 3. Which direction does the curve shift? 4. What happens to and ?
Check yourself · no marks
A new government subsidy pays farmers 1 dollar for every pound of tomatoes they grow. What shifts, and what happens to price and quantity?
Commit to one first. Guessing and being wrong beats reading the answer cold.
Worked Example
Analyze three real-world headlines. For each: identify the shift, predict and .
- ‘Gas prices hit record highs after major refinery explosion.’
- ‘Coffee shortage expected as drought hits Colombian growers.’
- ‘Viral celebrity endorsement makes a once-obscure hot sauce wildly popular.’
A celebrity endorses the product on Instagram and weekly demand surges. Starting from equilibrium (, ), use the sliders to model what happens — aim for a new equilibrium where is about 13 units.
A raw-material shortage has dramatically driven up production costs across the industry. Use the sliders to model what happens to this market.
Practice · 1 / 5
A new medical study links coffee to longer life expectancy. Supply is unchanged. What happens?
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