Supply And Demand Essay

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.

| An oligopolist that faces a kinked demand curve is charging price P = 6. Demand for an increase in price is Q = 280  40P and demand for a decrease in price is Q = 100  10P. Over what range of marginal cost would the optimal price remain unchanged?Answer

1. A firm's current profits are $1,000,000. These profits are expected to grow indefinitely at a constant annual rate of 3.5 percent. If the firm's opportunity cost of funds is 5.5 percent, determine the value of the firm:

A basic principle of economic theory and a vital element in every economy is supply & demand. The law of demand states that, everything being equal, the greater the price of a good/service, the lesser the quantity of that good is demanded. On the other hand, the law of supply states that the greater the price of a good/service, the greater that good is supplied at (Jackson et al 2007).

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.

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.

Consider the Law of Supply on p. 36 of the textbook. What affect do lower prices

The aggregate demand and the aggregate supply model is a macroeconomics model that explains price level and real output through the relationship of aggregate demand and supply. The aggregate demand curve consist of consumption(C), investment (I), government spending (G), net export (NX). The question caused by monetary expansion. In this essay, it analysis monetary policy, Philips curve which relation between inflation and unemployment.it draws conclusion and apply the theory into two countries which are England and France.

Different market decisions determine how an economy is run. There are several different factors that account for how markets make their decisions, which determines how they function. The theory of markets mostly depends on supply and demand. However, it is key to note that there is a difference in demand/supply and quantity demanded/supplied. A demand is how much the buyer plans to purchase at various markets prices and the quantity demanded is what the buyer actually purchases at a particular price. Supply is the producer or the seller’s plan of the amount the seller will make available at different market prices and the quantity supplied is the actual amount that the seller makes available at a particular market price. It is important to

Supply curve shows the relationship between the quantity supplied of a good or service and its price. The law of supply states that while other determinants remain the same (cetris peribus), the price for services or goods increase, quantity supplied for the services and goods will increase, conversely, the price for services and goods decrease, quantity supplied for the

As the prices of inputs such as labor, raw materials, and capital increase, production tends to be less profitable, and less will be produced. This leads to a decrease in supply. Technology relates to methods of transforming raw materials to finished goods. Improvements in technology will reduce the costs of production and make sales more profitable so it tends to increase the supply. The last factor effecting supply is expectations. If firms expect prices to rise in the future, they may try to produce less now and more later.

Take dairy milk for an example, in 2009 the price for dairy milk was 23.73 pence per litre, the demand for dairy milk was 982 million litres in that year and the supply of milk in 2009 was 13,128 million litres. This meant there was an excess supply, this is when there is too much supply of a product, in this case dairy milk and not enough demand. This may of caused the price to fall to what it was as the excess supply didn’t allow the market equilibrium to be met therefore a new market equilibrium would have been created and that caused the price to be lower as the market price will fall to try and increase demand.

The consumer¡¦s expectation about the oil price is decreased, thus the demand for the oil will be reduced, and it shifts the demand curve to left. The price of the oil will be reduced also.

With a decrement in supply, the supply curve shifts inwards along the demand curve, causing a new equilibrium price as well as equilibrium quantity to be achieved. In this case, the equilibrium price will increase, whereas the equilibrium quantity will decline (Gillespie 2007, p.72-99).The diagrams below illustrate causes of increase in equilibrium price:

A change in anything that affects supply besides price causes a shift on the supply curve. Factors that affect the supply curve are; price of inputs, technology, expectations, and taxes and subsidies. If a producer finds that the cost for producing specific items is getting higher than supply of that item will begin to decrease as it is not economically sound to continue to make a large amount of these items. Technology has a direct affect on supply, as it becomes easier and less expensive to produce an item more of that item is produced. As with the demand curve expectation also has an affect on the supply curve, if consumers expect the cost of a product to increase they will buy more of that items which causes a decrease of supply. An example of this would be when the price of gas is expected to raise people will fill their car up and also fill gas containers. Tax also has an effect on the supply curve as it does on the demand curve, as taxes increase on a specific items then the supply for that particular items increase as people stop purchasing the item.