This is a collection of diagrams for supply and demand. It is mainly for my benefit, so when creating a post, like the price of tea I can easily find a suitable diagram to illustrate what is happening.
Supply Shifts to the Right
In this diagram the supply curve shifts to the right. It leads to a lower price and increase in quantity. The supply curve may shift to the right because of:
- Lower costs of production
- Lower taxes
- Increased productivity
Supply and Demand Shift Right
In this diagram, supply and demand have shifted to the right. This has led an increase in quantity (Q1 to Q2) but price has stayed the same.
It is possible, that if there is an increase in demand (D1 to D2) this encourages firms to produce more and so Supply increases as well.
Diagram Showing Increase in Price
In this diagram, we have rising demand (D1 to D2) but also a fall in supply. The effect is to cause a large rise in price.
For example, if we run out of oil, supply will fall. However, economic growth means demand continues to rise.
Increase in Demand
An increase in demand leads to higher price and higher quantity.
A Fall in Demand
Fall in demand increase supply
Fall in Price
Fall in Supply
Fall in supply causing lower quantity and higher price.
Increase Demand Fall in Supply
Increase in demand and fall in supply leading to higher price.
Increase in supply with inelastic demand.
Price set below the equilibrium (football)
Inelastic supply and bigger increase in demand
UK Housing market has often seen demand increase at a faster rate than supply, causing price to rise.