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How shifts in demand and supply affect equilibrium
Consider the market for pens. Suppose that a new educational study has proven that the practice of writing, erasing, and rewriting improves students' ability to process information, leading parents to steer away from pen use in favor of pencils. Moreover, the price of ink, an important input in pen production, has dropped considerably.
On the following graph, labeled Scenario 1, indicate the effect these two events have on the demand for and supply of pens.
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