Question

Explain what the non-price determinants of demand and supply are and then discuss in detail the critical role that price plays in ensuring that markets reach equilibrium. What economic terms are equal at equilibrium and what would happen to price and quantity of oranges if a severe frost damages a large portion of the Florida crop? Search entries or author Unread 77 77 Subscribe

please help me to answer these questions

Answer 1

Ans- Non Price components of the demand and supply are :-

1. Taste and preferences

2. Income of the buyer

3. Climate Change

4. Business Expectations

5. Government rules and regulations

6. Business Cycle

7. Types of Goods

When above components are assumed to be constant, Price is the main component which affect demand and supply.

If price rises, demand falls and if price falls demand rises.( Negative relationship between price and demand)

If price rises supply rises and if price falls supply of goods also falls.( Positive relationship between price and supply).

Equilibrium achieve when

Supply of Goods=Demand of Goods

Due to frost damage of Florida crops supply of oranges will fall due to which price rises and there is inflationary situation in the economy.