...applicable even to everyday life. For business managers is essential to be aware of laws of demand, supply, and equilibrium to grow their business. Examples of the mentioned laws are abundant in the daily ground, and by recognizing and exploring them people can learn by observations. The author will discuss the market equilibration process based on example that everyone can relate to – food. Law of demand Demand is how much consumers are willing to pay for a good or service in particular period. The demand relationship is showing the interdependence between quantity and price. For instance, if the cost for exotic fruits is relatively low, consumers will be willing to purchase more kilograms. On the contrary, side if fruits that are imported in the country are expensive, the buyers are likely to buy just a few as for the remaining sum they will fill in their basket with local fruits. The inverse relationship between demanded quantity and price is defined by McConnell, Brue, and Flynn (2009) as law of demand; it is shown on graph 1. Graph 1. Relationship between demanded quantity and price Law of supply Supply is how much of a good or service the market can offer for a certain cost. The law of supply is the relationship between price and quantity supplied. The graph representing the law of demand has a downward slope. Opposed to it, graph 2 that shows the interdependency between supplies and cost has upward slope representing that the cheaper units are, the more they are...
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... Market Equilibration Process Paper The following content items are expected to be developed: • The paper/presentation includes specifics about Law of Demand and lists main determinants of demand, Law of Supply and lists main determinants of supply. The basic determinants of demand are (1) consumers’ tastes (preferences)- a change that makes the product more desirable—means that more of it will be demanded at each price. Demand will increase; the demand curve will shift rightward. An unfavorable change in consumer preferences will decrease demand, shifting the demand curve to the left., (2) the number of buyers in the market,- An increase in the number of buyers in a market is likely to increase product demand; a decrease in the number of buyers will probably decrease demand. (3) consumers’ incomes,- For most products, a rise in income causes an increase in demand. (4) the prices of related goods,- A change in the price of a related good may either increase or decrease the demand for a product, depending on whether the related good is a substitute or a complement: and (5) consumer expectations- Changes in consumer expectations may shift demand. A newly formed expectation of higher future prices may cause consumers to buy now in order to “beat” the anticipated price rises, thus increasing current demand. • The paper/presentation explains how equilibrium and disequilibria (surplus and shortage) occur on the market. - The equilibrium price (or marketclearing price...
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...concern with distressed home sales and if that will interrupt the recovering in 2013. Matthews mentioned how lenders of banks are being more generous with financing for homes. This is causing an increase in demand, allowing even more buyers to enter the market in return raising the value of homes even more. Referring to Graph A, you will notice that the financing is causing a shift to the right for demand. Resulting in a mortgage that is more affordable and with the home value on the rise it gives the buyers a sense of making a good investment. Equilibrium price and quantity both increase caused by the increase shift in demand for the housing market. Due to the demand increase this causes producer surplus to unambiguously increase while consumer surplus is ambiguous. The record low mortgage rates, which is mostly caused by the Feds buying mortgage-backed securities, has increased home value as well. Matthews collected analysis from Tim Iacono, showing that a buyer can buy a home from these low rates, that is about fifty percent more pricey than what he or she could possibly afford using the average mortgage rate over the last twenty years or so. Graph B will show that the purchasing of mortgage-backed securities is causing an increase in demand and supply. Increase in demand is from...
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...Microeconomics Practice Exam One (Chp 1 - 4) 1. The marginal benefit from consuming another unit of a good: A. must equal the marginal cost or the unit will not be consumed. B. must be less than the marginal cost or the unit will not be consumed. C. equals the increase in total benefits from consuming the unit. D. equals the total benefit obtained from the consumption of all prior units. 2. Mary buys cell-phone services from a company that charges $30 per month. For that $30 she is allowed 600 minutes of free calls and then pays 25 cents per minute for any calls above 600 minutes. Mary has used 600 minutes this month so far. What is her marginal cost per minute of making additional calls? A. 25 cents B. 10 cents C. 5 cents D. Zero 3. Suppose the marginal cost of dating Perry is $30 and the marginal benefit is worth $40 to you. Following economic reasoning, you should: A. date Perry. B. not date Perry. C. determine what your sunk costs are. D. determine what your total benefits and total costs are. 4. Alan is sitting in a bar drinking beers that cost $1 each. According to the economic decision rule, Alan will quit drinking when the marginal: A. benefit to him of an additional beer is less than $1. B. cost to him of an additional beer is less than the marginal benefit. C. cost remains at $1. D. benefit to him of an additional beer is greater than $1. 5. Opportunity cost: A. includes only monetary outlays. B. is the net benefit forgone by not undertaking...
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...ECO 202 M1 Assignment 3: Demand and Supply https://homeworklance.com/downloads/eco-202-m1-assignment-3-demand-and-supply/ Assignment 3: Demand and Supply The use of E-Books has increased in recent years, especially with the advent of mobile E-Readers. A marketing research firm recently developed the following supply and demand schedules for E-books: Price/E-Book Quantity Demanded Quantity Supplied $18 4000 10,000 16 5000 9500 14 6000 9000 12 7000 8500 10 8000 8000 9 9000 7500 8 10000 7000 7 11000 6500 6 12000 6000 5 13000 5500 4 14000 5000 2 15000 4500 Assignment Guidelines: Using Microsoft (MS) Excel, construct a graph showing supply and demand in the E-Book market based on the data above. (Save this file because you will re-work it later in the assignment.) When finished, copy and paste or import your graph into an MS Word document. (Tutorials for working with MS Excel and MS Word can be found through the Tutoring Services and Tutorials link at the top of the page.) In your MS Word document, below your imported graph, respond to the following: 1. Explain how theLaws of Supply and Demand are illustrated in this graph. 2. Describe theequilibrium price and quantity in this market. 3. Assume that the government imposes aprice floor of $12 in the E-Book market. Explain what would happen in this market. 4. Assume that the price floor is removed and aprice ceiling is imposed at $6. Explain what would happen in this market. 5. Now, assume that the price...
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...Supply and demand are basic economic concepts that are usually applied in a market environment where there is a presence of a manufacturing firm and consumers. Both are also components of an economic model which is an instrument in determining the price and quantity of a particular product in a given time or place. “Supply” is defined as “the amount of goods or services that can be provided by a company to its consumers or clients in an open market” while “demand” is said to be “the willingness of the consumers or clients to buy or receive products or services from a firm in the same open market.” These concepts are always present in every economic activity – whether in business and anyplace where economic exchange is present. In economics, both concepts also adhere to their own respective laws. The law involves a particular concept and its relationship to the price and its counterpart concept. The law of supply states that the supply and price are directly related. If there is an increase in price, the same increase applies to the supply due to the owner’s increased production and expectation of profits. If the price goes down, there is no reason to increase production. On the other hand, the law of demand conveys the inverse relationship between price and demand. If the demand is high, the price goes down to make the product more available, and the reverse happens when the demand is low while the price goes up to make up for the product costs. Both laws only apply as there...
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...Assignment 3: Demand and Supply How are the Laws of Supply and Demand illustrated in this graph? Explain your answers. The graph shows the basic laws of supply and demand. It does not show any factors that can or will control or influence what happens to the demand of computers. This graph shows that as the price of computer increases the demand for the computer decreases and supply of computers increase. The prices of the computer would be a determinant in this case. As the price of the computer decreased, the demand for the product also increased, but the supply of the product also goes down. What is the equilibrium price and quantity in this market? The equilibrium price is $125 and the equilibrium quantity is 1,750. Suppose the government imposes a special tax on these computers. Describe what would happen in this market in terms of the supply and demand curve. Taxes reduce both demand and supply and increases the equilibrium cost to a price higher than it would be without the tax and also decreases the amount that is wanted by the consumer that is lower without the tax. If a buyer has the option to buy an item that is equal to the item that has tax added, they will more likely purchase the product for a cheaper price. Assume that the government imposes a price floor of $150 in the computer market. What would happen in this market? If the government enforced a price floor of $150 on the E-Books a few things might normal, and there could be a surplus of...
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...when; demand and supply are balanced. The below graph illustrate the state of market equilibrium by showing the demand and supply curves with the point at which they are intersect one another – at the point of intersection of the two curves is when and where market equilibrium happens. The illustration of the graph, at the point where demand and supply curves intersect, depicts the situation where the supplied goods at the market are equal with the existed demand at the market – in terms of prices and quantity. Market disequilibrium is the opposite of market equilibrium – the unbalance of demand and supply at the market. That is when; the supplied good are equal to the demanded good at the market. However, when in the market there is a high level of supply and as the result prices start at very low what happen is surplus of supplied good in the market. Or if the situation is other way round; there is very low level of supply and as the result prices start at very high what happen is shortage of supplied good in the market. Further, surplus means there is too much of a product more than what consumers need in the market. While in another hand, shortage means there is less of a product for fulfilling the consumers need in the market. ANSWER FOR QUESTION 4 Giffen goods are those consumer goods that, in a simple description, go against the basic nature of relationship between demand and price. Meaning; Giffen goods are consumer goods that their demand increases...
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...its Malaysia automotive total industry volume (TIV) forecast for 2011. New Myvi could be a major driver of passenger vehicle sales. The demand for the new Myvi increase due to buyer holding back as they wait for the new model. On the other hand, the sales of old model decrease. Myvi was still Malaysia’s best selling passenger car. From the OKS research, Malaysia Automotive Association, Proton shows the higher sales and the percentage change in revision is 14%. Analysis and the use of graph 1. According to the news report, OSK Research state that Perodua’s revised sales forecast of 195000 units was easy to hit the target due the high demand of New Myvi. The forecast sales are increasing 11.9% from 171750 units (previous) to 195000 units (revised). The consumer pent-up demand for the new Myvi. The increase in the demand for new Myvi can be explained using graph (a). the higher the demand for new Perodua Myvi, the higher the sales of Perodua Myvi. The demand curve shifts to right, from D0 to D1. 2. As mentioned in the report, OSK Research had earlier forecast a year-on-year drop in total industry volume (TIV) due to supply problems faced by Japanese vehicle after the earthquake and tsunami in March. The decrease in supply of Japanese vehicles due to disaster will rise the supply for new Myvi. As shown in graph (b), the supply curve of Japanese vehicle will shift leftward from S1 to S2 , resulting in higher Japanese vehicle’s...
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...total milk production in the world. India has grow its production to around 4% on annual bases in recent yrs, which far exceeds the global average of about 1%. The market size of Indian Dairy is around US$ 45 Billion. This sustained increase in the domestic milk production & also helped in increasing the countries per capita availability of milk. The per capita availability of milk has increased from 112 grams per day in 1968-69 to 252 in 2010-11. About 80% of the total milk produced in the country is in the unorganized sector & the remaining 2 of milk0% is equally by cooperative & private diaries. Production and supply Production in Rural area -98 Production in Urban area- 2% Consumed at home – 35 % Sale at market-65% (urban market sale -82%) Supply via Informal-57%, Cooperative – 18%, Private-25% The major milk producing states in the country are: • Uttar Pradesh • Punjab • Rajasthan • Madhya Pradesh • Maharashtra • Gujarat • Andhra Pradesh • Haryana These states together account to about 70% of the total milk produced in India. Out of the total milk produced in India 55% is of buffalo and 43% milk is of cow. Buffalo milk is healthy as it has 3.7% protein, 7.3% fat, 5.6% milk sugar, 0.7% ash and 81.9% water. And cow milk has 3.4% protein, 3.6% fat, 4.8% milk sugar, 0.9% ash and 85.9% water...
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...stripping, waxing, and buffing of ceramic floor tiles. This work is contracted out to office maintenance firms, and both technology and labor requirements are very basic. Supply and demand conditions in this perfectly competitive service market in New York are: |QS = 2P - 20 |(Supply) | | | | |QD = 80 - 2P |(Demand) | where Q is thousands of hours of floor reconditioning per month, and P is the price per hour. |A. |Algebraically determine the market equilibrium price/output combination. | When calculating for equilibrium, QS = QD 2P – 20 = 80 – 2P 4P = 100 P = 25 When substituting the value of P in the equation for supply and demand, we calculate the value of Q as QS = 2P – 20 QS = 2*25 – 20 QS = 30 Equating both supply and demand and solving it for Q 2p+2p=80+20 4p = 100 P = $25 Q = 30 (thousands of hours) |B. |Use a graph to confirm your answer. | For the graph use: Prices: 10, 20,30,40,50,60,70,80,90 Quantities: 5,10,15,20,25,30,35,40,45,50,55,60,65 [pic] The figure below shows a firm in a perfectly competitive...
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...Use the Supply & Demand model to explain how a good’s price is determined In ordinary practice, price is the quantity of payment or reimbursement given by one party to another in return for goods and services. It is generally expressed in some form of currency. This essay will discuss how a good’s price is determined using the demand & supply model. Supply & demand is perhaps one of the most fundamental concepts of economics. It is an economic model of price determination in a market. It ascertains that in a competitive market the unit price for a specific good will fluctuate until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers, resulting in an economic equilibrium of price & quantity. DEMAND Demand refers to the want or the willingness of the consumers to buy commodities. The demand for a product may be defined as the quantity of the product that a consumer will purchase at the existing price during a particular period of time. Demand is influenced by the price of commodities. The higher the price of the commodity, the lesser will be the demand of a rational consumer; other things remaining constant. The hypothesis of – other things remaining constant – is known as the ceteris paribus. The demand curve illustrates the relationship between price & quantity demanded (as the price increases the quantity demanded decreases). Movement along...
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...discussion last week focused primarily on opportunity cost, supply and demand, and elasticity. Before class we had concerns as we either had not discussed the concepts since high school or college or either had no clue of what these things were or what they meant. Some of us were also unfamiliar with the graphs being used and cringe at the sight of calculating formulas into a graph. At this point there are varying degrees of comfort with the material, but we are optimistic with more study time and practice we will all be successful. Opportunity Cost As the class began the concept of opportunity cost became clear to us all and we now understand that it is something that must be forgone in order to pursue a certain action. Or more simply put the value of the next best choice given up when making a decision. One of our group members was actually experiencing the concept of opportunity cost while we were in class as they had an exam scheduled for the next day that they needed to pass in order to start a new job. The decision of whether to attend class or use that time to study had come in to question and it was determined the value of attending class would be more beneficial than staying home and attempting to catch up on what was missed in class. Because of this situation and the others discussed in class we are comfortable with the concept of opportunity cost. Supply and Demand As our discussion went on into supply and demand, the concept most of us seemed to remember the most...
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... Fair, and Oster Macroeconomics Supply and Demand Questions. Points to remember: 1. Always begin from and end with an equilibrium position. 2. Shift a curve or curves when you have specific reasons for doing so – and remember that a shift in one curve will NOT cause a shift in another. 3. Remember that an increase in supply shifts the supply curve to the right (increases the quantity offered at any given price) or down (decreases the cost of production). 4. Compare the beginning and ending equilibrium: -- If only one curve has shifted, the result will be unambiguous: price has risen or fallen, and the equilibrium quantity has increased or decreased. – If two curves have shifted, either price or quantity will be uncertain unless you are given more specific information. Problem 1. Draw supply and demand curves illustrating each of the following situations: a. Laptops. Quality improvements in laptops have led to an increase in demand. But we know the price of laptops has fallen over time. Data from oldcomputers.net: Macintosh Power Book, 1990: $ 2300 ($ 3500 in 2010 dollars), 2 MB RAM, 10 MB hard drive, 25 MHz processor, monochrome 640 x 400 9-inch LCD. (MB = Megabyte). Sales in 1992 = 400,000. Current MacBook 2010 (entry level): $ 1000, 2 GB RAM, 250 GB hard drive, 2.26 GHz processor, color 1280 x 800 13.3 inch LCD. (GB = Gigabyte, 1000 times more than a megabyte). Sales in 2010: about 3 million. What happened ? Answer: an increase in demand would drive the equilibrium price...
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...question. [pic] Refer to the diagram. Between the prices of $10 and $8, the price elasticity of demand is: A. 0.5 B. 0.9 C. 1.11 D. 2 2. A perfectly inelastic demand schedule: A. rises upward and to the right, but has a constant slope. B. can be represented by a line parallel to the vertical axis. C. cannot be shown on a two-dimensional graph. D. can be represented by a line parallel to the horizontal axis. 3. The price elasticity of demand coefficient measures: A. buyer responsiveness to price changes. B. the extent to which a demand curve shifts as incomes change. C. the slope of the demand curve. D. how far business executives can stretch their fixed costs. 4. Suppose that as the price of Y falls from $2.00 to $1.90 the quantity of Y demanded increases from 110 to 118. Then the price elasticity of demand is: A. 4.00. B. 2.09. C. 1.37. D. 3.94. 5. If a demand for a product is elastic, the value of the price elasticity coefficient is: A. zero. B. greater than one. C. equal to one. D. less than one. 6. In which of the following cases will total revenue increase? A. price falls and demand is inelastic B. price falls and supply is elastic C. price rises and demand is inelastic D. price rises and demand is elastic 7. Other things the same, if a price change causes total revenue to change in the opposite direction, demand is: A. perfectly inelastic. B. relatively elastic. C. relatively inelastic. D. of unit elasticity...
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