Final answer:
In business, transactions can shift supply and demand curves, affecting inventory levels. An increase in supply shifts the curve rightward and typically decreases prices but increases quantity supplied. Decreases in supply or demand shift the curve leftward and reduce the equilibrium quantity.
Step-by-step explanation:
The question regards how transactions affect the inventory balance in terms of supply and demand within a business setting, specifically for a company named Readers' Corner. When a transaction occurs that influences either supply or demand, it can cause the respective curve to shift either to the right or to the left on a graph. An increase in supply, for instance, will shift the supply curve to the right and generally results in a decrease in price and an increase in the quantity supplied, as depicted in Graph 1. In contrast, factors such as higher labor costs or a change in consumer tastes, which decrease the quantity supplied or demanded, will cause the respective curves to shift to the left, thus reducing the equilibrium quantity. This effect is exemplified by the decrease in the equilibrium quantity of Postal Services when labor compensation rises, or when tastes shift away from snail mail.
It's also important to identify the new equilibrium after such shifts and compare it with the original equilibrium price and quantity to understand the full impact on the business’s inventory levels. This analysis is crucial for a company like Readers' Corner to maintain an optimal inventory balance.