Shift effects of demand Shift effects of supply
Preferences price of inputs (factors of production)
Income Returned from alternative uses (prices of related goods)
Other goods prices Technology
Expectations Seller’s expectations
Demographics Natural events
Number of sellers
HOW DO MARKETS REACH EQUILIBRIUM?
Market Equilibrium- Where supply CROSSES demand
If you lower the price, more ppl want to buy
If you lower it too much, too many people buy it for not enough money
If equilibrium is STABLE, how can markets CHANGE?
The price that is “in equilibrium” for water will never be the same forever
We’ve spent over a trillion dollars of trying to stop the “war on drugs”
Certeris paribus- LATIN for “all else equal”
Hold everything else constant e