quantity.

Step 2. Decide whether the economic change you are analyzing affects demand or supply. In other words, does

the event refer to something in the list of demand factors or supply factors?

Step 3. Decide whether the effect on demand or supply causes the curve to shift to the right or to the left, and

sketch the new demand or supply curve on the diagram. In other words, does the event increase or decrease

the amount consumers want to buy or producers want to sell?

Step 4. Identify the new equilibrium and then compare the original equilibrium price and quantity to the new

equilibrium price and quantity.

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3.3 • Changes in Equilibrium Price and Quantity: The Four-Step Process 65

Let’s consider one example that involves a shift in supply and one that involves a shift in demand. Then we will

consider an example where both supply and demand shift.

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