ECON Rasmussen College Module 2 Law of Supply and Supply Curve Questions The Law of Supply suggests as prices increase, quantity increases, as well. Or as
ECON Rasmussen College Module 2 Law of Supply and Supply Curve Questions The Law of Supply suggests as prices increase, quantity increases, as well. Or as prices decrease, quantity decreases, too. There is a direct relationship between price and quantity.
A change in quantity supplied implies there is movement from one point on the supply curve to another point on the supply curve.
A change in supply implies that the entire supply curve shifts to either the left or the right.
To determine, which direction the curve will shift, please refer to the following determinants of supply:
Input costs
Taxes
Subsidies
Technologies
Other goods
Other sellers
The Law of Demand suggests as prices increase, quantities decrease and as prices decrease, quantities increase. There is an inverse relationship between price and quantity.
A change in quantity demanded implies there is movement from one point on the demand curve to another point on the demand curve.
A change in demand implies the entire demand curve will shift to either the left or the right.
To determine, which direction the curve will shift, please refer to the following determinants of demand:
Income
Tastes
Preferences
Other goods
Expectations
Other buyers
A market consists of both buyers and sellers. The equilibrium point is determined by the intersection of the supply and demand curve, which will dictate the equilibrium quantity and price.
The graph below was constructed by using the values in the table as references.
Quantity Demanded
Quantity Supplied
Price
110
10
1
100
20
2
90
30
3
80
40
4
70
50
5
60
60
6
50
70
7
40
80
8
30
90
9
20
100
10
10
110
11
From the graph given above the equilibrium price is $6.00 and the equilibrium quantity is 60 units.
Joshua receives a substantive increase in price, please illustrate on the graph given below a shift in the supply or a shift in demand curve. Please state whether price will increase or decrease and whether quantity will increase or decrease.
The demand curve will shift. Price and quantity will both increase.
If agricultural subsidies were cut, please illustrate on the graph below the direction or movement of the supply or demand curve. Please state whether the price will increase or decrease and whether quantity will increase or decrease.
The supply curve will shift to the left. Price will increase and quantity will decrease.
If expectations increase and taxes decrease, please illustrate the direction or movement of the supply and demand curves and state whether price will increase, decrease, or remain at the same level and state whether quantity will increase, decrease, or remain at the same level.
The supply and demand curves will both shift to the right. Price will be indeterminate (unchanged) and quantity will increase.
If input costs increase and income increases by the same proportion, please illustrate the direction or movement of the supply and demand curves and state whether price will increase, decrease, or remain at the same level and state whether quantity will increase, decrease, or remain at the same level.
Demand curve will shift to the right and the supply curve will shift to the left. Price is indeterminant (unchanged) and price will increase.
Demand
Supply
Market Demand and Equilibrium
