Change in supply
Change in the Number of producers in the marketAs tennis shoes become a more popular accessory to complement men and women's apparel, there is a higher demand for new shoes to be produced. For instance, if Adidas produced 150 shoes for $175, then other companies--like Puma and New Balance--would also more produce shoes. With more producers, the supply of shoes will produce causing the equilibrium to be 200 shoes for $125.
In contrast, as tennis shoes become a less popular accessory to complement men and women's, there is a lower demand for shoes to be produced. If there is a lower demand for tennis shoes, then there would not be a lower supply of producers in the area to produce shoes, causing the new equilibrium to be 125 shoes for $150. |
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Change in demand
Change in Price of a complementary goodTo complement an iPhone, Apple created an iPad so consumers could conduct more work on a larger tablet. If Apple raised the price for an iPhone from $125 to $175 while the price of an iPad decreased from $125 to $75, there would be a lower demand for the iPhone and a higher demand for the iPad. Originally, fifty thousand iPhones were sold for $125. But if the demand of iPhones increases, one hundred thousand iPhones would be sold for $150.
On the contrary, if Apple lowered the price for an iPhone from $125 to $75 while the price of an iPad increased from $125 to $175, there would be a lower demand for the iPad and a higher demand for the iPhone. As a result, the equilibrium price for the original iPhone price would be fifty thousand iPhones sold for $125 while the equilibrium price for the new iPhone price would be twenty-five thousand iPhones sold for $100. |
Change in consumer tastes or preferencesLeBron James, an endorse of Samsung's Galaxy phone series, has the ability to influence his fans that an iPhone is not the best phone. Originally, seventy-five thousand iPhones were sold for $200. If consumers are convinced not buy the newest iPhone model, Apple may decide to lower the equilibrium to fifty thousand iPhones sold for $150.
Conversely, if Apple released a commercial showcasing all the abilities a new iPhone model has over another phone model, then consumers may be convinced to buy the newest iPhone model. With consumers convinced to buy the latest iPhone model, Apple may decide to higher the equilibrium to seven thousand iPhones sold for $200. |