All diagrams come from patricia ramirez de la vina"s powerpoint elasticity of demand and equilibrium . Ecn 212 - lecture 5 notes - equilibrium and elasticity of demand. When the demand and/or supply curve shifts, the market equilibrium points shifts too. Three steps to analyzing changes in equilibrium. Decide if the event shifts the supply curve, the demand curve, or both. Decide in which direction the curve shifts. Use the supply-demand diagram to determine the effects of the shift. Step 2: determine in which direction the demand curve shifts. Right because the higher gas price will drive people to hybrid car alternative. Step 3: the shift causes an increase in price and quantity of hybrid cars. There is a shortage at the current price. New technology reduces cost of producing hybrid cars. Step 1: supply curve shifts, demand curve does not shift. Step 2: supply curve shifts right because it is cheaper to produce hybrid cars now.
