2.1 The Law of Supply and Demand Answers

A supply shift occurs when the quantity of a good producers are willing and able to sell changes because of factors other than the good’s price. A demand shift occurs when the quantity consumers are willing and able to buy changes because of factors other than the good’s price. Supply can shift because of changes in production costs, technology, taxes, or the availability of labor and resources, while demand can shift because of changes in income, population, tastes, or the prices of related goods. An increase in supply usually lowers the equilibrium price and raises the equilibrium quantity, while a decrease in supply usually raises price and lowers quantity. An increase in demand usually raises both equilibrium price and quantity, while a decrease in demand lowers both.