PM P1: Interaction of Demand and Supply
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8 Terms
What is the effect of Demand Increase?
Shortage created at initial price -> P ↑, Q ↑.
What is the effect of Demand Decrease?
Surplus created at initial price -> P ↓, Q ↓.
What is the effect of Supply Increase?
Surplus created at initial price -> P ↓, Q ↑.
What is the effect of Supply Decrease?
Shortage created at initial price -> P ↑, Q ↓.
What is the effect of Simultaneous DD ↑ & SS ↑?
Equilibrium Price is indeterminate (depends on relative magnitudes); Equilibrium Quantity ↑.
What is the effect of Simultaneous DD ↓ & SS ↓?
Equilibrium Price is indeterminate (depends on relative magnitudes); Equilibrium Quantity ↓.
What is the effect of Simultaneous DD ↑ & SS ↓?
Equilibrium Price ↑; Equilibrium Quantity is indeterminate (depends on relative magnitudes).
What is the effect of Simultaneous DD ↓ & SS ↑?
Equilibrium Price ↓; Equilibrium Quantity is indeterminate (depends on relative magnitudes).
Note 
Flashcards (35)