Identifying and Explaining Market Shortages and Surpluses

Scale Selection

Choose a scale that enables the graph to utilize most of the grid space effectively.

Axis Breaks

Axis may include breaks to adjust scales that do not start at zero.

Plotting Accuracy

Ensure plotted points are accurately marked for clear representation.

Curve Construction

Plot all points for one curve in full before connecting them with ruled lines and starting the second curve.

Essential Labels

Graphs must include a descriptive title, labeled axes (Price [$P$] and Quantity [$Q$]), and labeled curves (Supply [$S$] and Demand [$D$]).

The Horizontal Line Method

Draw a dotted horizontal line across the graph at the specified price ($P\_1$) to identify shortages or surpluses.

Identifying Quantity Demanded ($Q\_d$)

Find the intersection of the horizontal price line with the Demand curve ($D$) and draw a vertical line to the quantity axis.

Identifying Quantity Supplied ($Q\_s$)

Find the intersection of the horizontal price line with the Supply curve ($S$) and draw a vertical line to the quantity axis.

Market Adjustments

Indicate market reactions to imbalances using arrows along demand and supply curves toward the equilibrium point ($P\_e$, $Q\_e$).

Price and Quantity Shifts

Mark the change in price with an arrow on the vertical axis and show quantities moving to equilibrium on the horizontal axis.