Final answer:
To graph the market equilibrium changes, first, locate the initial equilibrium, then draw and label the shifted demand and supply curves due to external factors like changes in gym membership prices and technology. Finally, identify and label the new market equilibrium point.
Step-by-step explanation:
Steps to Graph Market Equilibrium Changes
For a market in bottled water:
Locate the initial market equilibrium where the original demand curve (D) intersects the supply curve (S), and label this point 1.
The fall in the price of a gym membership would likely increase the demand for bottled water, as people who go to the gym tend to consume more bottled water. This increased demand shifts the demand curve to the right. Draw the new demand curve and label it D1.
Technological advancements that cut the costs of producing bottled water would lead to an increase in supply. The supply curve would shift to the right. Label the new supply curve S1.
Draw the point where the new supply curve S1 and demand curve D1 intersect. Label this point 2.
Identifying the New Equilibrium
Once you have drawn the new demand curve D1 and supply curve S1, you will notice the new equilibrium point, labeled as 2. This is the new price and quantity where the market settles.
Comparing this new equilibrium to the original, you might see a decrease or increase in price and quantity depending on the shifts in supply and demand.