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Changes in Demand and Supply
Shifting the demand curve to the right or shifting the supply curve to the left will have long range economic effect. This is because demand curve and supply curve represent the market forces of demand and supply that determine economic status. The economic effects of the shift in the demand curve to the right will be as a result of an increase in the demand for products in the market (Nelson, 2013). This leads to an increase in price, which may lead to demand-push inflation in the long run. The increase in demand will also trigger production in the economy in a bid to clear the excess demand created by the increase in quantity demanded over the equilibrium supply. This will lead to new entrants to the market, and new investment.
On the other hand, shifting of the supply curve to the left will lead to an increase in the price of goods in the economy. Shifting supply curve to the left is as a result of reduction in the quantity supplied in the market (Opocher & Steedman, 2010). Therefore, the quantity supplied will be lower than the equilibrium quantity demanded by the market. This will cause a situation of excess demand that pushes the price of the commodity up.
The shifts are more significant than shifts along the demand curve or along the supply curve. This is because shifts along the demand curve and along the supply curve are caused by changes in the quantities demanded or quantities supplied. The difference is that shifts along the curves are cleared by the market and the changes in price are temporary (D’Orlando & Sanfilippo, 2010).. This makes the shifts to the right or left more significant than the shifts along the curves.
References
D’Orlando, F., & Sanfilippo, E. (2010). “Behavioral foundations for the Keynesian Consumption Function”. Journal of Economic Psychology 31 (6): 1035–1046
Nelson, R. (2013). Demand, supply, and their interaction on markets, as seen from the perspective of evolutionary economic theory. Journal of Evolutionary Economics, January 2013, Volume 23, Issue 1, pp 17-38
Opocher, A., & Steedman, I. (2010). “Input Price-Input Quantity Relations and the Numeraire”, Cambridge Journal of Economics, V. 3 (2010): 937–948