parallel to the old line. If a line has a smaller intercept, it would shift in (or down), parallel to the old line.

Solving Models with Algebra

Economists often use models to answer a specific question, like: What will the unemployment rate be if the

economy grows at 3% per year? Answering specific questions requires solving the “system” of equations that

represent the model.

Suppose the demand for personal pizzas is given by the following equation:

where Qd is the amount of personal pizzas consumers want to buy (i.e., quantity demanded), and P is the price

of pizzas. Suppose the supply of personal pizzas is:

where Qs is the amount of pizza producers will supply (i.e., quantity supplied).

Finally, suppose that the personal pizza market operates where supply equals demand, or

We now have a system of three equations and three unknowns (Qd, Qs, and P), which we can solve with algebra:

Since Qd = Qs, we can set the demand and supply equation equal to each other:
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