Shiftin Demand and Supply Curves
ShiftingIn Demand Curve
Iagree that a shift in the demand curve to the right and a subsequentshift of the supply curve to the left have a long-term economiceffect. This is because when the price of goods produced increases,the demand, as a result, shifts to the left. The value of thequantity produced about the former equilibrium will go higher, and itwill have a long-term effect to the economy. In the same manner,decrease in demand will reduce price and demand shift to the right,hence, a decrease in the value of the equilibrium (Besanko,Braeutigam & Gibbs, 2011).
However,it is better to understand that an increase in the price of the goodsmay trigger the supply since the supply of goods is prompted by thehigher prices. When the price of goods increase, the supply of thesame will be increased since the expected returns will be higher.What I mean is that not all shifts in the demand curve to the rightwill bring a long-term economic effect and it all depends on theduration it will take to produce similar goods. Some goods require ashorter time to produce hence the effect to the economy is short term(Su& Kirschen, 2009).
ShiftingIn Supply Curve
Theshift to the supply curve is caused by other external factor as toldin the discussion. When the supply curve shift to the left, themarket equilibrium is affected, and the effect will depend on thenature of the product that is under consideration. Nevertheless,shifts in the supply curve to the left have a long-term effect to theeconomy as it will take a long time before the product is producedand enters the market. The shifts are important than movement alongthe curve since the movement is affected by changes in price onlywhile a shift in the supply curve is triggered by the other factorsthat affect supply (Angrist & Krueger, 2001).
Angrist,J., & Krueger, A. B. (2013). Instrumentalvariables and the search for identification: From supply and demandto natural experiments(No. w8456). National Bureau of Economic Research.
Su,C. L., & Kirschen, D. (2009). Quantifying the effect of demandresponse on electricity markets. PowerSystems, IEEE Transactions on,24(3),1199-1207.
Besanko,D., Braeutigam, R. R., & Gibbs, M. (2011). Microeconomics.Hoboken, NJ: John Wiley.