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    Shift in supply and demand curve

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    Due to severe damage, a gas pipeline supplying gas to Arizona was shut down for a few weeks in the summer of 2003. Gas became scarce in Arizona, and prices rose, causing consumers to panic.

    Address the two questions in the analysis of this event's affect on the market equilibrium.

    1) Was there a shift in the supply curve, demand curve, or both?
    2) Did the shift happen to the left or to the right?

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    Solution Preview

    The shift in supply and demand curve happens due to factors other than price.
    Here the factor is damage to the gas pipeline, thus there will be reduction in supply causing leftward shift in the supply curve.
    On the other hand there will be rightward shift in demand curve (in anticipation of shortage)as there will be increase in demand, leading to increase in price.

    Thus there will be shift in both supply curve and demand curve.


    Supply and demand curves shows how the quantity demanded or supplied changes in response to a change in the price of that good. ...

    Solution Summary

    This explains various reasons of shift in supply and demand curve