Micro Foundations · intro
What moves on the Supply & Demand diagram
When a substitute gets dearer, consumers switch toward this good, shifting its demand right.
Start at equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change. in the market for good X.
The price of a substitute good Y rises.
Consumers switch from Y to X, demand for X rises at every price, D shifts right.
New equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change.: higher price and quantity of X.
Examiners ask this as: substitute price rises, competitor product dearer, beef price up chicken demand, rival good more expensive.
Other scenarios on Supply & Demand