Final answer:
When political and social forces are included in the supply/demand model, the equilibrium can shift or change. These forces can affect both supply and demand, causing the equilibrium price and quantity to move until a new equilibrium is found. The final step involves graphically combining individual analyses of demand and supply shifts to determine the new equilibrium.
Step-by-step explanation:
When political and social forces are added to the supply/demand model, equilibrium can shift or change(C). In the real world, these forces can lead to changes in policies, regulations, or consumer preferences, which ultimately shift the equilibrium price and quantity. Demand and supply curves react to these shifts independently. If one changes, it will cause the equilibrium to move along the other curve until a new equilibrium is established. When both curves shift, the final equilibrium depends on the relative size and direction of each shift.
To analyze the effect of political and social forces, economists first determine which curve is affected and in what direction it shifts. For instance, a new tax on a product could shift the supply curve leftwards (indicating a decrease in supply at each price point), leading to a higher equilibrium price and a lower equilibrium quantity. On the other hand, an increase in the popularity of a product might shift the demand curve to the right (indicating an increase in demand at each price point), raising both the equilibrium price and quantity. When combining the effects of both supply and demand shifts, we superimpose the diagrams of individual changes to ascertain the new equilibrium. As a result, the final step in a scenario where both supply and demand shift is to combine the two individual analyses graphically and determine what happens to the equilibrium quantity and price.