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Student Question

Secondary V • 2yr.

Hello! What happens at the equilibrium price when the supply curve shifts? Thank you !

Financial Education
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Explanations (1)

  • Explanation from Alloprof

    Explanation from Alloprof

    This Explanation was submitted by a member of the Alloprof team.

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    Team Alloprof • 2yr.

    Hello! :) Thank you for using our services! 


    Remember that the supply curve climbs to the right. If it moves to the right, it means that the quantity supplied is increasing. As a result, the crossover point between supply and demand will be lower on the y-axis, bringing the equilibrium price down. 

    Supply may increase for several reasons. In agriculture, this often happens when harvests are larger than expected. Producers therefore try to sell more and are ready to sell them at a lower equilibrium price. We are therefore in a situation of surplus. 

    When the supply decreases (it shifts to the left), it means that the quantity offered is less. The equilibrium price will therefore be higher, since we are talking about shortage (less on the market, but still as many potential buyers, since in this scenario the demand stays the same, so producers can afford to sell at a higher price!). 

    A tip to help you: Draw the graphics! An accurate graph can help you see the exact equilibrium price, but a sketch can just help you visualize and understand the consequences of a shift. 

    Hope that helps ! Let us know if there is anything else we can help you with ! :)


    -Marilee

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