Demand and Supply Discussion Questions
What are the determinants of demand?
Income Price of other (related) goods/services Population Advertising Expectation Tastes
How is the market supply curve derived from the individual supply curve.
The curve of a market supply curve is derived from the summation of individual supply curves. The market supply curve is derived by horizontally adding the individual supply curves.
Explain the Law of Demand.
The law of Demand shows that with an increase in price, there is a decrease in quantity and vice versa.
Explain Law of Supply
An increase in quantity supplied as price increases and vice versa.
What do economists mean when they say "price floors and ceilings?
Price floors and ceilings prevent price movements to correct these imbalances. When a price is set above equilibrium (i.e., a price floor), sellers will produce more than the market can support, diverting resources away from more highly valued uses. Price ceilings result in an underallocation of resources toward a particular good, where the excess demand (shortage) reveals that consumers value the good (and therefore the resources used to produce it) more than what the market currently offers
How is a market demand curve derived from an individual demand curve?
The market demand curve is the summation of all individual demand curves.
Why does a demand curve slope downward?
The slope of a demand curve is downward because the demand for lower prices makes quantity demanded increase.
For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of each firm's shares demanded equals the quantity of each firm's shares demanded equals the quantity supplied. So, if this equality always occurs, why do the prices of stock shares ever change?
The stock shares change prices not because of supply but because of demand.
Distinguish between a change in demand and movement along the demand curve, note the cause(s) of each.
A change in price causes movement along the commodity's demand curve. This movement is called a change in quantity demanded. A decrease in price leads to movement down the demand curve, or an increase in quantity demanded. Increased price leads to movement up the demand curve, or a decrease in quantity demanded.
Distinguish between a change in supply and a change in the quantity supplied, noting the cause(s) of each.
As price increases, the quantity supplied increases. An increase in price causes a movement up a given supply curve. A decrease in price causes a movement down a given supply curve, decreasing quantity supplied
Why does a supply curve slope upward?
The upward slope is because of the increase of price also causes an increase in quantity supplied.
What happens to the supply curve when any of these determinants changes?
These determinants will cause a shift in the supply curve. Anything causing an increase in supply will shift the supply curve to the right. A decrease in supply will be shown by a shift to the left
What happens to the demand curve if the determinants change?
This will cause a shift in the demand curve. If it is increasing then the demand curve will shift to the right and vise versa.
In 2001 an Outbreak of hoof -and- mouth disease in Europe led to the burning of millions of cattle carcasses. What impact do you think this had on supply of cattle hides, hide prices, the supply of leather goods, and the price of leather goods?
This would decrease the supply of cattle hides and leather goods. The price of both leather and hides would increase due to the short supply.
