Finance and the Economy · Microeconomics
The market starts in equilibrium at price P₁ (£5.00/kg) and quantity Q₁ (40k tonnes per week). Shift either curve and watch the new equilibrium settle at P₂ and Q₂. Question adapted from Economics for Business (Sloman, Garratt, Guest & Jones).
Flatter = more price-elastic; steeper = more inelastic. Curves pivot through the original equilibrium, so slopes change how far price and quantity move, not the direction.
Equilibrium price
£5.00
P₁ · per kg
Equilibrium quantity
40.0k
Q₁ · tonnes per week
What happened
Market at its initial equilibrium.
Rule of thumb. With a downward-sloping demand curve and an upward-sloping supply curve, a shift in demand moves price and quantity in the same direction, while a shift in supply moves them in opposite directions. Try shifting both at once: one of the two outcomes becomes ambiguous and depends on which shift is larger.
Built by Dr Kasra Kassai, LSBU Business School · drkassai.com