Question

Hi please help with these

1. Explain who and what demand and supply represent?
2. What is the difference between demand and quantity demanded, and supply and quantity supplied?
3. What are the Law of Demand and the Law of Supply, and explain why price and quantity demanded are inversely related, and why price and quantity supplied are directly related?
4. List the major determinants of demand, and explain how a change in each will affect the demand curve.
5. List the major determinants of supply, and explain how a change in each will affect the supply curve.
6. Explain the concept of equilibrium price and quantity.
7. What is productive and allocative efficiency, and explain how competitive markets achieve them.

Answer 1

1. Demand is goods or services people would like to buy for a price and supply is the goods or services people would like to provide for a price.

2. Demand is the downward sloping line which represents the quantities at different prices whereas quantity demanded is the amount of a product people are willing to buy at a certain price
Supply is the upward sloping line which represents the quantities at different prices whereas quantity supplied is the amount of a product people are willing to supply at a certain price

3. Law of demand is that the quantity varies inversely with the price; law of supply is that the quantity varies directly with the price. As the price increases, people have to spend more money and hence the demand is inversely related, whereas for law of supply, people would produce more for higher prices

4. Determinants of demand are:
a. Price of the good: Increase in price decreases the demand
b. Income of buyers: Increase in income increases the demand
c. Prices of related goods: Increase in prices of related goods increases the demand
d. Tastes of consumers: Increase in tastes increases the demand
e. Price levels: Increase in price decreases the demand

5. Determinants of supply are:
a. Cost of the inputs: Increase in cost decreases the supply
b. Prices of goods: Increase in prices increases the supply
c. Technology: With the advancement of technology the cost of reaching customers decreases which increases supply
d. Competitors: With the increase in customers the supply decreases

6. It is at the price where demand equals supply

7. Productive efficiency is at a point where AC is at its minimum, allocative efficiency is at a point where MC=P