PRICE CHANGES

Group 1
Members: Aiza shafayat,
and Rumaisa Awais
 What is price mechanism?
Price mechanism refers to the system where the forces
of demand and supply determine the prices of
commodities and the changes therein. The prices act as
a signal to producers

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 What is price changes?
A price change is a shift in the value of a
security or another asset to either a higher or
lower level.

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 What causes price changes?

Prices change everyday due to demand and supply

Demand Supply
Decrease in price, increases demand increases price, the producer will increase supply

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Scenario in which demand
causes a change in price In this scenario, increase in demand cause
the demand curve to move outwards

This resulted in shortage at the original

equilibrium price

The shortage acted as signal to the producer,

and thus prices were increased

This caused extension in supply curve and thus

a new market equilibrium was made

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Scenario in which supply
causes a change in price In this scenario, increase in supply, causing
supply curve to move outwards

This resulted in surplus at the original

equilibrium price

The surplus acted as signal to the producer,

and thus prices were reduced

This caused extension in demand curve and

thus a new market equilibrium was formed

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Example with scenario of
both demand and supply
In this scenario, there is an increase in
causing a change in price demand and supply of COVID-19 vaccine
simultaneously

The effect of quantity supplied and

demanded, effect the prices according to their
magnitude of change

Since, the demand of vaccine is greeter than

it’s supply, the price level increases

This caused the demand and supply curve to

interact and thus a new market equilibrium was
formed

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INDEX

What is price mechanism? What is price changes? Concept of contraction and

extension

The effect of demand on The effect of supply on price The effect of both
price level level demand and supply on
price level, as they both
are simultaneously
increasing/ decreasing

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THANK YOU!
Any Quarries?