The Market Forces Of Supply And Demand
The market forces of Supply and Demand.
a.Plotting the Demand and supply Curve.
The following Table Illustrates the values used in the plotted graphs.
Price Per Unit ($)Quantity Demanded Quantity Supplied 81106284362441520.560
The resulting graph is illustrated below.
Demand and Supply Curves for Comic Books
01234567890 1 2 3 4 5 6 7 8 9 10
Quantity of comic books P r i c e o f e a c h c o m i c b o o k
DemandSupply
b.Finding the Equilibrium point
Plotted on the graph, as well as seen clearly in the table, the equilibrium isestablished for the price of $2.00. In fact, at this price, the supply equalsthe demand at 4 units.
c.The Law of Demand and the Law of Supply (Price Increase)
According to the Law of Demand, if all other things remain constant, anincrease of price (from the equilibrium price of $2) to $6 would decreasethe quantity of comic books demanded to 2. Similarly, also provided allother things remain constant, the Law of Supply dictates that the number of comic books supplied would rise to 8. This creates a situation of excesssupply, or surplus, and would lead to an increased inventory size for thesuppliers.
d.The Law of Demand and the Law of Supply (Price Decrease)
The Law of Demand and the Law of Supply apply also in this case of price decrease under the price of equilibrium of $2. Ceteris Paribus, thedecrease in price to $1 would raise the quantity demanded to 5 and dropthe quantity supplied to 2. This creates a situation of excess demand(shortage) and reduces the size of suppliers’ inventory.
e.The effect of income on the demand curve.
Income is a determinant of demand. The Increase of income wouldincrease the demand for comic books, which are considered to be normalgoods. To obtain the new demand values, 3 units must be added for every price. The results are displayed in the table below.
Price Per Unit ($)Quantity Demanded Quantity Supplied New Quantity Demanded 8110462854366244715280.5609
This increase of demand
a.Plotting the Demand and supply Curve.
The following Table Illustrates the values used in the plotted graphs.
Price Per Unit ($)Quantity Demanded Quantity Supplied 81106284362441520.560
The resulting graph is illustrated below.
Demand and Supply Curves for Comic Books
01234567890 1 2 3 4 5 6 7 8 9 10
Quantity of comic books P r i c e o f e a c h c o m i c b o o k
DemandSupply
b.Finding the Equilibrium point
Plotted on the graph, as well as seen clearly in the table, the equilibrium isestablished for the price of $2.00. In fact, at this price, the supply equalsthe demand at 4 units.
c.The Law of Demand and the Law of Supply (Price Increase)
According to the Law of Demand, if all other things remain constant, anincrease of price (from the equilibrium price of $2) to $6 would decreasethe quantity of comic books demanded to 2. Similarly, also provided allother things remain constant, the Law of Supply dictates that the number of comic books supplied would rise to 8. This creates a situation of excesssupply, or surplus, and would lead to an increased inventory size for thesuppliers.
d.The Law of Demand and the Law of Supply (Price Decrease)
The Law of Demand and the Law of Supply apply also in this case of price decrease under the price of equilibrium of $2. Ceteris Paribus, thedecrease in price to $1 would raise the quantity demanded to 5 and dropthe quantity supplied to 2. This creates a situation of excess demand(shortage) and reduces the size of suppliers’ inventory.
e.The effect of income on the demand curve.
Income is a determinant of demand. The Increase of income wouldincrease the demand for comic books, which are considered to be normalgoods. To obtain the new demand values, 3 units must be added for every price. The results are displayed in the table below.
Price Per Unit ($)Quantity Demanded Quantity Supplied New Quantity Demanded 8110462854366244715280.5609
This increase of demand