Example supply and demand market

This post was updated in August 2018 with more information and examples.

What happens to market equilibrium price if both the supply curve and the demand curve increase? This is a favorite question of teachers because the answer is "it depends". 

How can an answer to a text question depend?  We have been taught all our lives that in school (not necessarily life) there is an answer to every question.  However, in economics the answer often depends on the context of the question and when both supply and demand shift right, or increase, then the answer of what happens to equilibrium price is unknown without more information.  To begin this discussion let's look at the market for hamburgers.  We will then shift both supply and demand to the right (increase them) for arbitrary reasons (maybe an increase in preference for hamburger, or it cures cancer or something, for the demand side and a decrease in input costs for the supply side).

This post was updated August 2018 with new information and examples.

We all feel the pinch from an income tax on our lives, but how does it affect the overall labor market?  The intuition behind shifts in demand and supply are a bit different in the labor market vs. shifts in the traditional goods and services market. This post will go over the effect of an income tax on the labor market, and discuss some ways to help develop the intuition of why this is important in the labor market..

Take a look at the typical supply and demand model on the left for your typical labor market.  Here S represents the supply of labor, people like you and me who apply for, and work at jobs to receive a salary.  The higher the salary offered, the more people are willing to work, either by getting a job at all, or their willingness to work more hours.  This is why the labor supply curve (the S curve) is upward sloping.  The curve D represents demand for labor.  This would be corporations and businesses that need labor as an input in their production process.  These businesses are willing to hire more labor (perhaps new people are pay them for additional hours works) if they can get it for a cheaper price, which is why the D curve slopes down.

But what happens in this labor market when an income tax is introduced? 

This post was updated in August 2018 with new information and examples.

Equilibrium Quantity	Demand Increase	Demand Decrease	Demand Same
Supply Increase	Higher	Unknown	Higher
Supply Decrease	Unknown	Lower	Lower
Supply Same	Higher	Lower	Same

This post has been updated in August 2018 with more information and examples.

This economics post is going to go over the economic concept of a reduction in demand.  It includes some examples and graphs to help with the concept, let me know if there are any questions or additions in the comments below:

Price floors are common government tools used in regulating.  A price floor is the other common government policy to manipulate supply and demand opposite from a price ceiling. A price floor means that the price of a good or service cannot go lower than the regulated floor.  A minimum wage law is the most common and easily recognizable example of a price floor. However, other price floors exist in any sector that the government is trying to protect such as agricultural goods or other sensitive industries.

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One form of government intervention is the introduction of taxes. Taxes are typically introduced to increase government revenue, but they also have the effect of raising the cost of goods and services to the consumer. Because of the increased cost, we generally see a reduction in the quantity of goods and services produced and consumed after the introduction of taxes. A common form of tax is a sales tax, which is added on to the price of a product and paid by the consumer. Another common type of tax is a VAT (value added tax) which is paid by the producer along their production chain.