Answering the questions with 3 demand and 3 supply curves

Always start at X and then consider the changes separately:

e.g. The market for chocolate is currently at equilibrium at point X. What will the new equilibrium be if a health report is published saying that eating chocolate increases life expectancy, and if there is an increase in the cost of cocoa beans.

Explanation: The health report will increase the demand for chocolate, causing the demand curve to shift to the right to D1. An increase in the cost of cocoa beans will increase costs of production and will therefore shift the supply curve to the left to S2.

Answer: A

Another example: The market for bicycles is currently in equilibrium at point X. What will be the new equilibrium if the cost of tyres increases and if there is a widely publicised increase in the number of cyclists killed on the roads.

Explanation: • The increase in the cost of tyres will increase costs of

production and shift the supply curve to the left to S2.• The increased number of accidents will discourage

some people from cycling and therefore reduce the demand for cyclists causing the demand to shift to the left to D2.

• Answer: B