Introduction
The four-step process is a tool to do a step-by-step analysis regarding the effect of an economic event on the supply or demand for a good and therefore on the equilibrium price and quantity of the same. We can reach a proper conclusion and portrait the result in an appropriate manner by using this process. This four-step process includes:
Step 1: Drawing of a demand and supply model before the economic change/event took place and finding out the demand and supply conditions along with the equilibrium price and quantities with the intersection of the demand and supply conditions.
Step 2: Deciding on the economic change/event affecting whether the supply or the demand conditions.
Step 3: Analyzing the effect of the economic event/change to make a shift of either the demand or supply curve leftwards or rightwards and doing the needful.
Step 4: Identifying the new equilibrium price and quantities and comparing it with the original equilibrium ones.