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Supply and Demand
 Supply ExpansionIn this case, the supply curve shifts to the right (expansion). This has two consequences: an increase in market equilibrium quantity and a decrease in price. Examples of what leads to this are: Technological improvement (decrease in costs), subsidy (decrease in the cost of taxes), and other things that lower production costs. |  Supply ContractionAnalyzing the contraction of supply, we see that the curve shifts to the left. This leads to a decrease in quantity and an increase in price at market equilibrium. This can be caused by accidents on the production line, unfavorable weather conditions (in the case of agricultural goods, for example) and increases in taxes on the good offered. That is: conditions that generate an increase in the cost of production. |  Demand ExpansionExplaining the expansion of demand, it can be noted that the curve shifts to the right. The new market equilibrium is of both higher quantity and higher prices. Examples of what can cause this are: Changes in consumer preferences (eg growing preference for products with a low environmental impact); income increase; increase in the price of a substitute good. |  Demand ContractionWhen we are in a scenario of contraction in demand, the curve shifts to the left. This generates a decrease in price and also in the market equilibrium quantity. This can be caused by a change in consumer preferences (such as a drop in consumption of unhealthy products), a decrease in income, or a decrease in the price of a substitute good. |
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Supply and demand for Microeconomic Analysis;
For the Macroeconomic Analysis template go to: Aggregate Supply and Aggregate Demand
Subtitle
S = Supply Curve
D = Demand Curve
Q = Quantity
P = Price
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