So now we can see how shifts in demand or supply are going to affect our equilibrium price and quantity. All right, So, um we're gonna start with demand here, but we're also gonna see how supply shifts are going to affect equilibrium price. And then we're also going to see how shifts in both. We're actually gonna shift demand and supply on the same graph. So that'll be pretty interesting. But these are the steps that we're usually gonna follow here on the right. Um These are the steps we're going to follow when we're doing these analyses. So, step one is, you know, the problem is going to give you some sort of information about, about the situation, right? They could say that consumer income is increasing or a natural disaster occurred. Right? So, your first job is to take this information and say, is this going to affect demand or supply? Or sometimes the event could affect both. Then we are going to decide which direction to shift. Right? If we've decided that it affects demand, was it a good thing for demand or a bad thing demand? Right. Are we gonna shift to the right or the left, then what we're gonna do is use this notation. Remember the P two, Q two and P one. Q one. So, we're gonna find this new price and quantity. These are gonna be our new equilibrium price and quantity and we're going to compare it to the original price and quantity, P one and Q one. So let's go ahead to the graph here and do an example. So you can see how these steps work uh in action. First thing I want to know about this graph is that now I'm only using one color for demand and supply. Right? I'm just gonna use blue. And the reason here is that by now you guys should feel pretty comfortable that demand is gonna be the downward run downward line. Right? We've got demand downward the double D. S. You guys can't forget that right? Supply. Just it's the other one. So what I wanna do, the reason I'm doing one color is because it's a lot easier to analyze the change if you see, okay blue is my original lines and I'm gonna use red for my new lines. And then it's a lot easier to say, oh this is the new supply because it can get hairy once we're drawing a lot of lines on the same graph. So let's go ahead and label our axis here. We've got our price, our quantity, our demand line and our supply line, right? Um So what I want to do first is I'm gonna label our original um equilibrium right here, I'm gonna put a circle and we're gonna have a notation for our original equilibrium versus our new equilibrium to help us distinguish one from the other as well. So this was our original equilibrium and I'm gonna use P. One and Q. 12. No no take that on the graph here. So we've got Q. One here and P. One over here, right? And now let's say something caused demand to shift to the right, say consumer preferences for the product um increased, right? So we're gonna shift our demand curve to the right and I'm going to use red for my new demand curve so that we can see different from the original situation. So I'm gonna move my demand curve out here And I'm Gonna label it d. two. So we should call them D. One and D. Two. Um That also helps us distinguish one from the other. Right? So I'm gonna always use one for the original situation and two for the new situation after the changes. Cool. So we've got our new demand line there in red. So let's go ahead and find our new equilibrium. And what I like to do is for the old equilibrium equilibrium, we're gonna use a circle. And for the new equilibrium we'll use a square. So I'm gonna go ahead and at this point I'm gonna draw a square around it. And this helps me see the difference right now I can easily pinpoint the original one and the new one, the circle and the square, you can use any any system you like. But this this works for me, so I'm gonna go ahead and at this point I'm gonna find my new quantity and my new price. So our new equilibrium quantity we can see here is that Q. Two, And our new equilibrium price is at P. Two. So a lot of times what a question will ask you is, okay, whatever demand shifted to the right, what happened to equilibrium price and quantity usually don't have numbers to deal with it. You're just gonna say something like equilibrium price has gone up and equilibrium quantity has gone up, right, And we know that from our analysis here on the graph that we've got this new quantity and this new price. Cool, let's do the same thing with a shift to the left down here. So we're gonna follow the same steps, let's go ahead and label our axis P. Q. In alphabetical order, left to right, downward demand, upward supply. Cool. And let's go ahead and put our original equilibrium price and our original equilibrium quantity here on the side, yep. And let's say that demand is shifting to the left now, right? So let's say that the price of a complimentary good has increased, right? So the complementary goods prices, increased demand for this product is going to shift to the left. So let's go ahead and put that in here. We've got our D. One and R. S. One, right? So let's put our D. Two in here, which is gonna be aligned, let's say over here And we'll call that d. two. And it's pretty clear where our new equilibrium is right here, where the new line crosses the old line, right. Cool. So let's go ahead and find our new equilibrium quantity and our new equilibrium price. And we're gonna see that the price has decreased and quantity has also decreased, right? So we'll see in situations where everything is held constant except demand shifts to the left. We're gonna see that price decreases and quantity decreases as well, and that's gonna be consistent for all problems where this graph occurs. Cool. So let's go ahead and do the same thing with supply shifts.

Okay, let's do the same thing here with supply. So now we'll hold the demand line constant and we're gonna move the supply line to the right or the left right. So let's go ahead on the graph. We'll label our axes P. And Q. We've got our downward demand and our upward supply, right? This will be D. One and S. One. And let's go ahead and use red uh to make our new supply line shifting to the right. So this could be some situation, let's say technology increased in the industry. So we've decided that the supply line is going to shift to the right. So let's go ahead and draw this on the graph. And then we'll find our prices and quantities. So I'll draw my new supply line over here as to I'm gonna do my my my square here from my new spot and my circle for my original, let's go ahead and find our original price and quantity and our new price and quantity. So supply is shifted to the right, Our original price and our original quantity here, P. One and Q. One. And now let's go to the square our new equilibrium which is somewhere around here at P. Two And Q. two. So what has happened in this situation when supply shifted to the right, we had our equilibrium price decrease and our equilibrium quantity increase. And that almost seems a little logical to me, I guess the supply shifting to the right, It's more efficient, they're able to make it a better price and uh they're able to bring more to market. I don't know, there's some logic there that kind of sits in the back of my head but it's just always easier to just see it on the graph and you can't get it wrong right, if you look at it on the graph we are gonna get it right every time. Let's do the same thing with the supply shift to the left over here. Alright, cool. Let's go ahead and label our axis. We've got price quantity, notice I do this every time because I'm trying to drill it in, we've got our downward demand D one upward supply s one. Cool. Alright. And let's go ahead and say that in this situation um our input prices increased, right, the price of gasoline increased and we use gasoline to run our machines. So we're gonna shift our supply line to the left and find our new equilibrium price and quantity. So I'm gonna draw the shift to the left here, something like that, that'll be S. Two. And let's mark our old equilibrium and our new equilibrium right here was the old one where the blue lines cross and here's the new one with the new line right there. Cool, let's compare our equilibrium. So here was our original equilibrium quantity and our original equilibrium price. And let's see what happened to the new equilibrium, we've got an equilibrium price here and equilibrium quantity here. So what happened in this case we're gonna see that the price has increased and the quantity has decreased. Cool. Alright, so these are all the different one sided shifts that we can do. Let's do some practice problems before we move on to two sided shifts. Alright, let's do it.