The final selection of an approach must depend upon the relative utilities attached to these four criteria, and that depends upon the particular situation and application. Key Concepts and Summary When using the supply and demand framework to think about how an event will affect the equilibrium price and quantity, proceed through four steps: 1 sketch a supply and demand diagram to think about what the market looked like before the event; 2 decide whether the event will affect supply or demand; 3 decide whether the effect on supply or demand is negative or positive, and draw the appropriate shifted supply or demand curve; 4 compare the new equilibrium price and quantity to the original ones.
Salmon Fishing Step 1.
In neoclassical theory, demanded quantity is a function of price only, often a linear one or one deriving from indifference curves. A shift to the right of the supply curve, from S A to S C, leads to a decrease in the equilibrium price of good X but an increase in the equilibrium quantity of good X, again assuming that demand is held constant.
Other factors, such as changes in consumer wealth and population, can affect the market demand of any product or service. In short, good weather conditions increased supply of the California commercial salmon.
In other instances, a house might require a certain number of items, so that a first collection of that number is purchased when the house is used for the first time, then - depending on breaks and replacement policies - over time new items are purchased.
A number of factors can thus affect the elasticity of demand for a good: Availability of substitute goods: The more and closer the substitutes available, the higher the elasticity is likely to be, as people can easily switch from one good to another if an even minor price change is made. Step 4.
In the four-step analysis of how economic events affect equilibrium price and quantity, the movement from the old to the new equilibrium seems immediate.
What else can be added? In normative economics, we judge what is good for society - or a collection of individuals - and suggest to policymakers what can be effective in changing behaviours.
Print newspaper circulation peaked in and has declined since then due to competition from television and radio news.