1. Problem statement: Explain the effect on equilibrium price (P) and equilibrium quantity demanded (QD) due to various changes using curves. 2. If consumer income increases: For a normal good, the demand curve shifts to the right (increases), leading to a higher equilibrium price and higher equilibrium quantity. 3. If the rent that the firm pays decreases: Production costs decrease, shifting the supply curve to the right (increasing supply). This usually decreases equilibrium price and increases equilibrium quantity. 4. If the expected price of the good decreases: Consumers expect lower future prices, so current demand decreases, shifting demand curve leftward, lowering equilibrium price and quantity. 5. If the price of a substitute good increases: Demand for the good increases (shift right in demand), raising both equilibrium price and quantity. 6. Problem statement: Given demand curve $QD = 800 - 2P$ and supply curve $QS = 200 + P$, find equilibrium price, quantity, evaluate surplus/shortage, and illustrate. 7. To find equilibrium, set $QD = QS$: $$800 - 2P = 200 + P$$ 8. Solve for $P$: $$800 - 200 = 2P + P$$ $$600 = 3P$$ $$P = \frac{600}{3} = 200$$ 9. Find equilibrium quantity by substituting $P=200$ into demand or supply: $$QD = 800 - 2(200) = 800 - 400 = 400$$ 10. So equilibrium price = 200 and equilibrium quantity = 400. 11. Surplus or shortage when $P=300$: Calculate quantity demanded: $$QD = 800 - 2(300) = 800 - 600 = 200$$ Calculate quantity supplied: $$QS = 200 + 300 = 500$$ Since $QS > QD$, there is excess supply (surplus) of: $$500 - 200 = 300$$ 12. Surplus or shortage when $P=100$: Calculate quantity demanded: $$QD = 800 - 2(100) = 800 - 200 = 600$$ Calculate quantity supplied: $$QS = 200 + 100 = 300$$ Since $QD > QS$, there is excess demand (shortage) of: $$600 - 300 = 300$$ 13. The demand curve $QD = 800 - 2P$ is downward sloping; the supply curve $QS = 200 + P$ is upward sloping. 14. Summary: - Equilibrium price: 200 - Equilibrium quantity: 400 - Surplus at price 300: 300 units - Shortage at price 100: 300 units This explanation and math demonstrate how shifts and equilibrium work in supply and demand.