Demand and Supply Assignment

Economically, the demand and supply of a product describes how cost or price, vary between availability and demand. Hence, for a given commodity, demand is the relation of the quantity of goods and services that consumers would be prepared to purchase at each unity price.

If we consider this supply and demand diagram prior to Government intervention (red line), the market leads to equilibrium price and quantity (P1, Q1) determined at the intersection of the supply (or MPC) and demand curve. Due to the

Supply and demand is a fundamental element of economics; it is the main support system of a market economy. Demand can be interpreted by the quantity of a product or service a consumer is desired to acquire at a given time period. Quantity demanded is the amount of product consumers are willing to purchase at a given price; the relationship between price and quantity demanded is commonly known as the demand relationship. Supply however, accounts for how much a market produces for consumers. The quantity supplied refers to the actual amount of a certain good firms are willing to supply to consumers when receiving a certain price. Having limited resources we all have to

Red line goes up. Not enough supply. New equilibrium point (higher on the price axis) *shift to the right. * price increase and quantity increase.

This causes the price and the quantity move in opposite directions in a supply curve shift. Also, if the quantity supplied decreases at any given price the opposite will happen.

When there is a change of one of the factors of supply- like changes in the prices of production inputs like labour or capital; a change in production technology and its associated productivity change; or the amount of competition in a specific product market- there is a corresponding change in the supply curve. For example, if worker productivity improves due to some human capital or technology investment, then the costs of production decrease. This exerts a positive effect on the supply curve shifting it right, where the new market equilibrium is at a higher quantity and a lower price, holding everything else constant. There can also be a negative shift that moves the supply curve to the left, with the resulting market clearing price being higher and quantity lower, ceteris

When quantity supplied do not equal quantity demanded the outcome is either excess supply or excess demand, and a tendency for price to change. As this happen the consumers will increase their quantity demanded, and the movement toward equilibrium caused by excess supply is both the supply and demand sides. When the excess supply occur quantity supplied is greater than quantity demanded. While the reverse of excess demand quantity demanded is greater than quantity supplied. The excess demand pushes prices upwards in decreasing the quantity demanded and increasing the quantity supplied. This movement takes place along both the supply curve and the demand curve.

Increased supply without changes to the demand creates a surplus leading to a lower equilibrium price and decreased supply. Without changes to the demand, our cost structure would lead to a higher equilibrium price due to shortage.

Other than changes in price affects the demand curve, the determinants of demand can cause the change in the demand curve shift to the right or to the left.

In addition to the law of demand, the law of supply also serves as the second major resource in studying economics. The law of supply states that with other factors remaining constant, as the price rises, the quantity of the product supplied also rises. Conversely, as the price falls, quantity of the product supplied also falls (Colander, 2006, p 97). The law of supply is refers to how producers can effectively substitute the production of one product for another (Colander, 2006, p.

Some factors that can cause a shift in the supply curve include: technology, taxes, factor cost, and other alternative goods. Some factors that can cause a shift in the demand curve include: taste, a change in the consumer population, a change in income, and a change in other goods and availability. The graph for this week shows that both the supply and demand curves are shifting to the left. This means that both the supply and the demand are simultaneously decreasing in the market. This also means that the equilibrium price in the market has also decreased and shifted to the left as well. Business firms would view this graph as having negative progress in the market because this graph is telling business firms that they can no longer supply as much of their product as well as not many consumers are interested in their product anymore which as a result, are forced to drastically lower the price of the

When more or some items are supplied than demanded, competition among sellers trying to get rid of the excess will force the price down, discouraging future production. The resources used for that item being set free for use in producing some else that is in greater demand. Conversely, when the demand for a particular item exceeds the existing supply, rising prices due to competition among consumers encourages more production, drawing resources away from other parts of the economy to accomplish that.

This is a perfect example of a change in demand; when the demand increases, at the same or even a higher price, more quantity is demanded. In the figure below, a shift to the right in the demand curve signifies an increase in demand.

The demand curve shows what happens to the quantity demanded of a good when its price varies, holding constant all the other variables that influence buyers. When one or more of these other variables changes, the demand curve shifts leading to an increase or decrease in demand. The table below lists all the variables that influence how much consumers choose to buy cigarettes.4

When the price of a good rises the quality demanded falls, if we think about how much does it falls. To figure out by how much it falls we must calculate the price elasticity of demand which is calculate by how responsive demand is to rise in price. Also, the price elasticity of supply measures the responsiveness of quantity supplied to a change in price.