Question

Chapter 3: Competitive Product Markets and Firm Decisions A. Supply and Demand (15) 1. Explain the difference between an "increase in demand" and an "increase in quantity demanded" (including a discussion of what could cause them to happen). (10) 2. Explain how a free market automatically eliminates a market shortage in the short-run (the price mechanism). (5)

Answer 1

Then are two ways for the market demand for a good to go down. A lower demand or from a decrease in quantity demanded. A change in quantity demanded represents a movement along in quantity demand curve while a change in demand represents a shift in the entire demand curve the demand curve has an inverse relationship between price and quantity. consumers buy more of a good as its price goes down and buy less of a good as its price goes up. The demand curve of a good plots the quantity demand curve of a good as its price goes down and buy less of a good plots the quantity demand curve for a good as a function of its price. Though this curve, a producer can estimate how much of a good it can sell in the current market and how demand would change in response to a price change Change in Quantity: A decrease in demand occurs when the entire demand curve shifts downward.