Question

Reflect on recent/current events in the real-world and cite one example of a case where the price of some item increased or decreased, as a result of a change in supply or demand. In your posting, explain which side of the market (S or D) changed, and which way (left or right) it shifted to cause the observed change in market price.

Answer 1

I am considering the case of US-China trade war where US as well as China have reduced their trading. As China can produce goods cheaper as they have cheaper labor available in their country. If China reduce exports to U.S., they have less excess to Chinese cheaper goods which raises the prices of these goods in U.S.

You can see the case in diagram below where the initial equilibrium is at point E where the prices is at P1 in US and output is at Y1. When China reduced their exports to U.S., less supply with the same demand. Supply curve shifts to left which raise the price to P1 and output falls to Y1 in US market.