An equilibrium, then a demand shift, on an exact graph

In this video, we find market equilibrium and explain how rising demand changes price and quantity.

Question one. Q d equals twenty minus two P and Q s equals three P. Find the equilibrium price and quantity. Then demand rises to Q d equals thirty minus two P: find the new equilibrium and explain what happened to price and quantity.

Put quantity on the horizontal axis and price on the vertical axis. Draw demand D, sloping down, and supply S, sloping up. At equilibrium, quantity demanded equals quantity supplied, so twenty minus two P equals three P.

Rearranging gives five P equals twenty, so the equilibrium price is four.

Substituting into supply, three times four gives an equilibrium quantity of twelve.

Mark their intersection as E one, at quantity twelve and price four. Now demand shifts right to D one because buyers demand more at every price. Set thirty minus two P equal to three P for the new equilibrium.

Five P equals thirty, so the new equilibrium price is six.

Supply now gives three times six, so the new equilibrium quantity is eighteen.

Mark E two at quantity eighteen and price six. Price rises from four to six, and quantity rises from twelve to eighteen. Notice that supply has not shifted; the higher price causes a movement along supply.

Hence, the original equilibrium is price four and quantity twelve; the new equilibrium is price six and quantity eighteen.