Question

i need help with all the questions, the answers must be indepths and at least 3 paragraph for each question. i am using the text book: economics the basic 2nd edition by micheal mandel. you might need the text to help. There are 6 questions. i will leave a good review.

d-ons Help All changes saved in Drive Times New. - 12 - BI UAE -12 - E IE E- 1) Explain the effect on demand caused by the following: a. the expectation of future price increases, b. a change in the price of the good, c. an increase in the price of a substitute good, and d. an increase in the price of a complementary good. 2.) Why do supply curves slope upward? Explain? What is the difference between a change in supply and a change in demand? 3. Explain the concept of the market equilibrium. What happens when price is set above the equilibrium? What happens if the price is set below the equilibrium? Explain. 4. List and explain three factors that cause the demand curve to shift? What will happen to the equilibrium price when we have an increase in demand? 5. List and explain three factors that cause the supply curve to shift? 6. What does elasticity mean? If the demand for a product is inelastic, what are the implications?

Answer 1

(1)

(a) expectation of future price increase : it leads to increase in demand of product in the present. as in the future price of product may increase so customer will buy more the product in the present time.

(B) a change in price of goods : leads to increase and decrease in demand . if price increase demand decreases, and vice versa.

(C) increase in price of substitute goods. : increase in price of one goods leads to demand for other goods. example of tea and coffee. if price of tea increase demand for coffee increase as tea will be expensive than the coffee.

(D) increase in price of complementary goods. : increase in price of one goods affect the demand of other goods. car and petrole increase in price of petrole decrease the demand for car. and vice versa.

(2)

A supply curve slopes upwards when suppliers get inspired to increase the supply when prices of services or goods rise. apart from it higher marginal cost of production.followed by higher price . so price increase with increase in supply so supply curve is upward sloping.

difference between change in supply and change in demand

change in supply	change in demand
A change in supply means that the entire supply curve shifts either left or right. it is caused by production conditions, changes in input prices, advances in technology, or changes in taxes or regulations.	it is caused by shift in tastes, changes in population, changes in income, prices of substitute or complement goods, or changes future expectations.

(3) market equilibrium is market condition in which buyer and supplier are ready to exchange goods and services a partcular price. this price is called equilibrium price and quantity exchage at this price is call equilibrium quantity. and market equilibrium occur where equilibrium quantity is exchane for equilibrium prices.

when price is set above the market equilibrum price the market will experience excess supply and less in demand this is known as price floor condition which government adopt to regulate price. and opposite to it when prices are set below the equilibrium price the demand will increase and supply will be less this situation we can call price ceiling. government will adopt this to give social benefits to society.

Price Excess Supply S. Excess Demand Quantity

(4)

expectation of future price increase : it leads to increase in demand of product in the present. as in the future price of product may increase so customer will buy more the product in the present time. deman curve will shift to right keeping the price constant.

increase in price of substitute goods. : increase in price of one goods leads to demand for other goods. example of tea and coffee. if price of tea increase demand for coffee increase as tea will be expensive than the coffee. demand curve of coffee will shift to right or left. depending upon the price of tea.

increase in price of complementary goods. : increase in price of one goods affect the demand of other goods. car and petrole increase in price of petrole decrease the demand for car. and vice versa. it will shift the demand curve to right or left depending the price of other product.

when demand increase the it will shift to rightward keeping the supply curve constant , it wil touch to new intersection point then price increases and quantity increases also.