Question

Make 3 examples of "2 MARKETS" balance questions and answers :

•Create a demand and supply function

•Find the balance and describe it graphically

Answer 1

1. Automobile market

It is one of the competitive industry market. There is lots of companies involved in the production and supply of differentiated car. There are wide range of customer who is demand differ due to taste and preference.

Supply function = f ( steel price, wage rate, price)

Supply of automobile depend upon input price like a steel cost and wage rate. Increase in the price of input will be shift the supply curve to the left. Royal Enfield in the price of oil automobile increases the quantity supply it is movement along the supply curve.

Demand function = f( price, income, taste, milage, price of substitute car)

Demand for automobile depends upon primary price level. Higher the price lower will be demand. While income influence the demand positively, test is the mix of other factors and external effect on consumer demand of automobile.

2. Market for computer product

Supply function = f(price, wage , slicon chip prices, material price)

Supply of computer product depend upon price positively while input price shift the supply of computer left ward. Some other factor like key material price also influence supply function.

Demand function= f( price, income, price of other computer, IT infrastructure)

Typically demand for computer product depend upon its price negatively and positively with consumer income. While price of other substitutable computer will related positively. Demand also depends upon the communication technology and its infrastructure in the surrounding. Better infrastructure will require higher quantity of computer.

The demand curve drive from the demand function shows inverse relation between price and quantity demanded. While the supply curve derived from the supply function shows positive relationship between price and quantity supplied. Therefore balance will reach at equilibrium E when both cut each other.