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1、TheMarketforpinksalmonhasastandardizedproduct,forwhichpricehassubstantiallydeclinedinrecentyears.CaseStudy:PinkSalmonInitialEquilibriumTwodecadesago,fishersearnedarelativelyhighpriceforeachpoundofpinksalmon.ThatpriceisrepresentedasP1,attheintersectionofsupplycurveS1andde
2、mandcurveD1.ThecorrespondingquantityofpinksalmonisrepresentedasQ1.QPP1OQ1D1S1ChangesinEquilibriumOverthepastfewdecades,supplyanddemandshiftedinmarketforpinksalmon.ChangeinSupplyOnthesupplyside,improvedtechnologyintheformoflarger,moreefficientfishingboatsgreatlyincreasedt
3、hecatchandloweredthecostofobtainingit.Also,highprofitatpriceP1encouragedmanynewfisherstoentertheindustry.Asaresultofthesechanges,thesupplyofpinksalmongreatlyincreasedandthesupplycurveshiftedtotheright,asfromS1toS2.PP1OQ1D1S1S2QChangeinSupplyChangeinDemandOverthesameyears
4、,thedemandforpinksalmondecreased,asrepresentedbytheleftwardshiftofdemandcurve.Thatdecreaseresultedfromincreasesinconsumerincomeandreductionsinthepriceofsubstituteproducts.Asbuyers’incomesincreased,consumersshifteddemandawayfromcannedfishandtowardhigher-qualityfreshorfroz
5、enfish,includinghigher-qualityspeciesofsalmonsuchasChinookandCohosalmon.ChangeinDemandMoreover,theemergenceoffishfarming,inwhichsalmonareraisedinnetpens,loweredthepricesofsubstitutespecies.That,too,reducedthedemandforpinksalmon.Thedecreaseofdemandisrepresentedbytheleftwa
6、rdshiftfromD1toD2.QPP1OQ1D1S1D2ChangeinDemandNewEquilibriumTheincreasedsupplyof,anddecreaseddemandfor,pinksalmongreatlyreducedtheprice,asrepresentedbythedropfromP1toP2.Boththesupplyincreaseandthedemanddecreasehelpedreducetheequilibriumprice.QPP1OQ1D1S1D2S2Q2P2However,the
7、equilibriumquantityofpinksalmonincreased,asrepresentedbythemovefromQ1toQ2.Bothshiftsofthecurvesreducedtheequilibriumprice,butequilibriumquantityincreasedbecausetheincreaseinsupplyexceededthedecreaseindemand.QPP1OQ1D1S1D2S2Q2P2NewEquilibrium