Step 4. Compare the new equilibrium price and quantity to the original equilibrium price. The new equilibrium
(E1) occurs at a lower quantity and a higher price than the original equilibrium (E0).

Figure 3.18 (b) shows the shift in demand in the following steps.

Step 1. Draw a demand and supply model to illustrate what the market for U.S. Postal Services looked like
before this scenario starts. The demand curve D0 and the supply curve S0 show the original relationships. Note
that this diagram is independent from the diagram in panel (a).

Step 2. Did the change described affect supply or demand? A change in tastes away from snail mail toward

digital messages will cause a change in demand for the Postal Service.

Step 3. Was the effect on demand positive or negative? A change in tastes away from snailmail toward digital

messages causes lower quantity demanded of postal services at every given price, causing the demand curve
for postal services to shift to the left, from D0 to D1.
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