Changes+in+Demand+impact+on+Equilibrium+AP+MICE

Table of Contents
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 * ======Demand Increase======
 * ======Demand decrease======
 * ======Shift left======
 * ======Shift right======
 * ======Equilibrium price======
 * ======Equilibrium quantity======

Assuming there are no changes in the supply (//ceteris paribus//):

If the __demand__ ** INCREASES **(shown by a shift to the ** RIGHT ** of the __demand curve__), then generally, the __equilibrium price__ ** INCREASES ** and the __equilibrium quantity__ ** INCREASES **.

If the __demand__ ** DECREASES **(shown by a shift to the** LEFT **of the __demand curve__), then generally, the __equilibrium price__ ** DECREASES ** and the __equilibrium quantity__ ** DECREASES **.

Real life example:
http://www.americanprogress.org/issues/2010/10/cash_over_clunkers.html Examine the graph under "Effect of the program on the used car market" and the graph under "Effect of the program on new vehicle sales." Then answer the following questions. To read suggested answers, highlight the blacked-out text beneath each question.

1. Why is there a steep rise in the prices of used cars immediately before the "Cash-for-Clunkers" program? The Recession caused a great decrease in incomes. Used cars are an inferior good, so the decrease in income caused an increase in demand, which in turn increased the equilibrium price of used cars.

2. What do you believe happened to the quantity of used cars that were bought immediately before the "Cash-for-Clunkers" program and why? The equilibrium quantity of used cars increased. This is because the demand for them increased due to the fact that used cars are inferior goods and the incomes of much of the population decreased greatly because of the Recession.

3. Why is there a decrease in the sales of new cars before the "Cash-for-Clunkers" program? The Recession caused a decrease in incomes for many people. Since new cars are normal goods, the decrease in income caused a decrease in demand, which in turn decreased the equilibrium quantity of new cars.

4. What do you believe happened to the prices of new cars that were bought before the "Cash-for-Clunkers" program and why? The equilibrium price of new cars decreased. This is because the demand for them decreased because new cars are normal goods and the Recession caused the decrease in incomes of many people. 5.If the government says that only in cars have the correct safety features, What will happen to equilibrium on price and quantity in the new car market? Equilibrium price and Equilibrium quantity will increase due to the rightward shift of the demand curve caused by a change in consumer expectations.