Question

Scenario	Which Curve(s) Shift? In which direction?	Impact on Equilibrium Price and Equilibrium Quantity?
In the market for apples, orchard productivity of apple increases and a new medical report touts the discovery of new health benefits of apples, what happens to the equilibrium price and output?

Answer 1

1. If orchard productivity increases then it will increase the supply of orchards as more orchards can be produced with same amount of resources. Similarly, if a new medical report discovers health benefits of apples then it will increase the demand for apples. To summarise:
- Supply increases and hence supply curve shifts to the right
- Demand increases and hence demand curve shifts to the right

2. The above can be represented graphically -

This will unambiguously result in an increase in equilibrium quantity from Q to Q' as shown above. However, the equilibrium price may increase, stay same or decrease depending on the extent of the shift of both curves -

1. If increase in supply < increase in demand, then equilibrium price will increase.

2. If increase in supply = increase in demand, then equilibrium price will stay constant.

3. If increase in supply > increase in demand, then equilibrium price will decrease.