Describe the outcomes to equilibrium price and quantity when supply and demand curves shift when 1) supply is normal (elasticity = 1) and demand is elastic, 2) supply is normal (elasticity = 1) and demand is inelastic, 3) demand is normal (elasticity = -1) and supply is elastic, 4) demand is normal (elasticity = -1) and supply is inelastic, 5) demand and supply are both elastic, 6) demand and supply are both inelastic.
In the competitive model the interaction between supply and demand is is delineated as a relationship charting out the price on the Y axis versus the quantity on the x-axis. The supply curve in general is depicted by an upward sloping curve, were low dollar values are associated with low quantities produced. As the quantity …show more content…
The demand care has a low quantity consumed associated with high dollar price and increasing quantity is associated with lower dollar prices. The relationship of these two slopes of demand vs supply are characteristics of the competitive market. As there is increase supply the cost the price will rise. As there is a decrease in demand the price will also decrease. Where these two curves intersect, there is an equilibrium obtained. At this equilibrium supply equals consumption. When the price is it too high, the demand will decrease and there will be a excess supply or surplus. When the price, however, is set to low the quantity of demand is increased and there becomes a shortage of supply. When such a shortage occurs, the demand for quantity produced will be increased as will the price moving the supply closer to the equilibrium point. In a similar fashion when there is a surplus less quantity will be produced to reduce the excess supply. Market prices will also be reduced to bring the market back to equilibrium. In addition to the effects of shortages and oversupply on the demand and supply, both of these curves can be shifted based on other factors. Anything that increase demand will shift …show more content…
With and inelastic supply there will be little change in quantity with regard to price or otherwise stated a higher percent change in price compared to percent change in quantity in the upward direction
5) demand and supply are both elastic, With both demand and supply being elastic there is significant change in percent of quantity compare to price. This moves equivalent point to the right or left depending on the type of changes. The overall change to price however, could be negligible if demand and supply change act in opposition to each other. The net price could be zero or there could be a negligible change depending on which has the higher elasticity; demand or supply. If however the changes in supply and demand work in the same direction, there could be a significant change in price as these two elastic effects are compounded.
6) demand and supply are both inelastic. When both supply and demand are inelastic there is little change in percent of quantity compared to change in price or increased price compared to quantity. There would therefore be a significant change in
In the competitive model the interaction between supply and demand is is delineated as a relationship charting out the price on the Y axis versus the quantity on the x-axis. The supply curve in general is depicted by an upward sloping curve, were low dollar values are associated with low quantities produced. As the quantity …show more content…
The demand care has a low quantity consumed associated with high dollar price and increasing quantity is associated with lower dollar prices. The relationship of these two slopes of demand vs supply are characteristics of the competitive market. As there is increase supply the cost the price will rise. As there is a decrease in demand the price will also decrease. Where these two curves intersect, there is an equilibrium obtained. At this equilibrium supply equals consumption. When the price is it too high, the demand will decrease and there will be a excess supply or surplus. When the price, however, is set to low the quantity of demand is increased and there becomes a shortage of supply. When such a shortage occurs, the demand for quantity produced will be increased as will the price moving the supply closer to the equilibrium point. In a similar fashion when there is a surplus less quantity will be produced to reduce the excess supply. Market prices will also be reduced to bring the market back to equilibrium. In addition to the effects of shortages and oversupply on the demand and supply, both of these curves can be shifted based on other factors. Anything that increase demand will shift …show more content…
With and inelastic supply there will be little change in quantity with regard to price or otherwise stated a higher percent change in price compared to percent change in quantity in the upward direction
5) demand and supply are both elastic, With both demand and supply being elastic there is significant change in percent of quantity compare to price. This moves equivalent point to the right or left depending on the type of changes. The overall change to price however, could be negligible if demand and supply change act in opposition to each other. The net price could be zero or there could be a negligible change depending on which has the higher elasticity; demand or supply. If however the changes in supply and demand work in the same direction, there could be a significant change in price as these two elastic effects are compounded.
6) demand and supply are both inelastic. When both supply and demand are inelastic there is little change in percent of quantity compared to change in price or increased price compared to quantity. There would therefore be a significant change in