Changes in Market Equilibrium

Understanding Supply and Demand Shifts

Introduction to Market Dynamics

• The video explores how changes in supply and demand affect equilibrium price and quantity in a market.

• A new disease-resistant apple is introduced, impacting suppliers by reducing losses from disease.

Impact of Disease-Resistant Apples on Supply

• The introduction of disease-resistant apples shifts the supply curve to the right, indicating an increase in quantity supplied at every price point.

• As a result, the equilibrium price decreases due to increased supply while assuming demand remains constant.

Changes in Consumer Preferences

• A study reveals that apples may prevent cancer, leading to increased consumer interest and preference for apples.

• This shift causes the demand curve for apples to move rightward, increasing the quantity demanded at each price level.

Effects on Equilibrium Price and Quantity

• With rising demand for apples, both equilibrium price and quantity increase as more consumers seek out apples.

• The old equilibrium quantities are compared with new ones, showing a clear upward trend in both metrics due to heightened consumer interest.

The Influence of Pear Cider Advertising

Advertising Campaign Effects

• An advertising campaign for pear cider affects apple cider demand negatively since consumers now have an alternative option.

• As a result, apple cider producers will require fewer apples, shifting the apple demand curve leftward.

Supplier Response to Changing Demand

• If farmers can grow both pears and apples, they might allocate more resources towards pears due to increased demand from advertising.

• Consequently, this could lead to a decrease in apple supply as farmers reduce their production of apples.

Combined Effects on Equilibrium

• Both decreased demand for apples (shift leftward of the demand curve) and reduced supply (shift leftward of the supply curve) create complex dynamics affecting prices.

• Despite these shifts, if both curves move similarly without drastic changes in one direction or another, equilibrium prices may remain stable while quantities decline.

Exploring Further Scenarios

Potential Outcomes with Drastic Supply Changes

• If there is an extreme reduction in apple supply beyond initial expectations due to farmer reallocations or other factors, it could significantly impact equilibrium prices.

Economic Impacts of Supply and Demand Changes

Understanding Price and Quantity Dynamics

• The relationship between supply and demand can lead to varying outcomes in price and quantity. In this scenario, despite a rise in price, the quantity supplied decreased.

• A significant decrease in supply compared to demand results in an increase in price. Different scenarios can yield different price outcomes based on shifts in supply or demand.

• The actual impact on price cannot be determined without analyzing the specific curves involved; equilibrium prices must be assessed for clarity.

Effects of Labor Costs on Supply

• When apple pickers unionize and demand higher wages, it increases production costs for suppliers, affecting their willingness to produce apples.