1 Answer | Add Yours
First, you have to draw your original supply and demand curves. Remember that price goes on the y axis and quantity on the x axis. Your demand curve will slope downward from left to right and your supply curve will slope upward from left to right. The point where they intersect is your equilibrium price and quantity. Follow this link to make sure you've drawn your graph correctly.
When the government institutes this program, demand should go down because of changes in consumer tastes. To show this, draw a new demand curve, parallel to the first, but to its left. Do not draw a new supply curve because supply has not been affected. The intersection between the new demand curve and the supply curve is your new equilibrium price and quantity. If you have done everything correctly, your new equilibrium price and quantity will be lower than your old equilibrium price and quantity. This is because a reduction in demand causes (all other things being equal) less of a good to be sold and it causes the price to be lower).
We’ve answered 317,833 questions. We can answer yours, too.Ask a question