Final answer:
To determine the value of the unintended change in inventories, draw a market model, decide if the economy change affects demand or supply, the direction of the shift, and then compare the new equilibrium to the old.
Step-by-step explanation:
To determine the value of the unintended change in inventories, one must follow a systematic approach involving an understanding of market dynamics. Here are the steps:
Draw the market model: Begin by sketching the supply and demand curves to represent the market before the economic change. This includes the initial equilibrium where the demand curve, based on the law of demand, and the supply curve, based on the law of supply, intersect. Also, identify the shift variables for both demand and supply.
Analyze the economic change: Determine whether the change impacts the demand or supply side by referencing the list of demand factors or supply factors.
After identifying whether demand or supply is affected, decide the direction of the curve shift — whether it's an increase (rightward shift) or decrease (leftward shift).
Compare new and old equilibrium: Draw the new equilibrium after the shift and compare the new values of price and quantity against the original ones to determine the unintended change in inventory levels.
By assessing the difference between the original and new quantity supplied and demanded at the new price level, you can calculate the unintentional inventory change.