Pric

e(2

000

dol

lars

per

bar

rel)

Year19

6919

7119

7319

7519

7719

7919

8119

8319

8519

8719

8919

9119

9319

9519

9719

9920

0120

0320

050

10

20

30

40

50

60

70

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

0

2

4

6

8

10

12

14

16

18

20

Qua

ntity

(mill

ions

of

bar

rels

per

day

)

Year

A Supply Schedule for Apartments Price ($1000s) 100 99 98 97 96 95 94 93 92 91 90 Quantity of Apartments Supplied 10 9 8 7 6 5 4 3 2 1 0

A Demand Schedule for Apartments Price ($1000s) 100 99 98 97 96 95 94 93 92 91 90 Quantity of Apartments Demanded 0 1 2 3 4 5 6 7 8 9 10

Combined Supply and Demand Schedules for Apartments Price ($1000s) 100 99 98 97 96 95 94 93 92 91 90 Quantity of Apartments Supplied 10 9 8 7 6 5 4 3 2 1 0 Quantity of Apartments Demanded 0 1 2 3 4 5 6 7 8 9 10

Supply and Demand Schedules After an Increase in Supply (Only)

Price ($1000s) 100 99 98 97 96 95 94 93 92 91 90 Quantity of Apartments Supplied 12 11 10 9 8 7 6 5 4 3 2 Quantity of Apartments Demanded 0 1 2 3 4 5 6 7 8 9 10

Supply and Demand Schedules After an Increase in Demand (Only) Price ($1000s) 100 99 98 97 96 95 94 93 92 91 90 Quantity of Apartments Supplied 10 9 8 7 6 5 4 3 2 1 0 Quantity of Apartments Demanded 4 5 6 7 8 9 10 11 12 13 14

Summary of the Effects of Shifts in Supply and Demand Effect on

Equilibrium Price

Effect on Equilibrium

Quantity

Increase in Supply

fall rise

Decrease in Supply

rise fall

Increase in Demand

rise rise

Decrease in Demand

fall fall

Distinguishing Three Forms of Insufficiency in Supply Considered a

Fundamental Characteristic of

the World?

Always Disappears at

Market Equilibrium?

Related to Basic Human Needs?

Scarcity Yes No No Shortage No Yes No Inadequacy No No Yes

Price

Quantity

Year

Pric

e (2

000

dolla

rs p

er b

arre

l)

Qua

ntity

(m

illio

ns o

f ba

rrel

s pe

r da

y)

2006

1986

1981

19781973

19741979

1996

1995 2001

Pric

e (2

000

dolla

rs p

er b

arre

l)

Quantity (millions of barrels per day)

1969 1995

1979

1981

2006

1996

1986

197820041985

1980

Per

Cap

ital C

onsu

mpt

ion

of O

il (g

allo

ns p

er d

ay)

Price 17 16 15 14 13 12 11 Quantity Supplied 9 7 5 3 1 -- -- Quantity Demanded 3 4 5 6 7 8 9

Price

Quantity

S1

D

S2

Q1Q2

P2

P1