Mba 640 Managerial Economics

The Market Forces of Supply and Demand Elasticity and Its Application Supply, Demand, and Government Policies How does the economy coordinate interdependent economic actors? Through the market forces of supply and demand. The

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.

-The role and significance of prices in the market economy has to do with supply and demand. If there are the same amount of buyers as products, the price will settle. If there are more buyers than products, the price of the product will rise. And, if there are more products than buyers, the price of the product will decrease. This occurs until the supply of the product matches the demand of the product.

Have you ever wondered how the goods and services you purchase become available to you, and have you ever wondered how the prices are determined? Even though economics involves many concepts, supply and demand, as well as trade, are among the most important forces in an economy because of their effect on prices, consumer behavior and economic growth.

What is the Law of Supply and Demand? Explain how increases and decreases in supply and demand affect prices.

So when demand increases and a supply doesn’t change, a shift in price will happen. This shift will move to the right causing a new Equilibrium.

What happens to the equilibrium price and quantity after these changes are put into effect? Do they go up, down or stay the same?P:_____down_____________Q:_____down__________________

Determine how price elasticity of demand affects the decision making of the consumer and of the organization.

Discussion 2: Supply and Demand. Analyze how the law of demand applies to a recent purchase that you made. Describe how the product has changed in price and explain whether the price change is due to supply or demand. Did the change in price affect your decision to purchase the item?

Supply and demand concepts are all around us. Take for example a shoe factory. From a macroeconomic perspective everybody needs shoes. This type of product is a necessary and not a luxury product. So, there will always be a higher demand of shoes. The company will always try to find the best price to sell the shoes so that the demand increases. The price of shoes is also determined by the production cost of the shoe since it needs to be higher than it. Producing the shoes does not only depend on the company itself but on other macroeconomic indicators. For example, if oil prices increase, the company will need to increase the price of the shoes since it would cost more to pay the suppliers for delivering the materials needed in the production process. Also, as the law of supply says, when supply increases, the price increases. If the supply

How do the concepts of macroeconomics help you understand the factors that affect shifts in supply and demand on the equilibrium price and quantity?

Economists have created a theory of demand which states the following. Demand curve has a downward slopping which shows the relation between price and quantity while all other factors are equal. At higher prices the demand will decrease, while at lower prices demand will increase.

The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the

Supply and demand regulate the amount of each good produced and the price at which it is sold. It is the conduct of individuals as they work together with one another in aggressive markets. “A market is a group of buyers and sellers of a particular good or service. The buyers, as a group, determine the demand for the product, and the sellers, as a group,

Like the law of demand, the law of supply demonstrates the quantities that will be sold at a certain price. But unlike the law of demand, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue.