Solve equilibrium equations without losing the economics
The algebra is only a compact version of the graph. Suppose demand is Qd=100-5P and supply is Qs=20+3P. Equilibrium requires the same quantity to be both purchased and sold, so set the expressions equal: 100-5P=20+3P. Solving gives P=10, and substitution into either equation gives Q=50. Always check both equations. A price that produces different planned […]
With two shifts, separate what is certain
Conflicting effects require information about relative magnitudes. If demand and supply both rise, equilibrium quantity must rise, but price is indeterminate: demand pushes it up while supply pushes it down. If both curves fall, quantity falls and price is indeterminate. If demand rises while supply falls, price rises but quantity is indeterminate. If demand falls […]
