Question

In: Economics

Can someone confirm the following statements for me: Demand Curve (Factors: income, preferences, number of buyers,...

Can someone confirm the following statements for me:

Demand Curve (Factors: income, preferences, number of buyers, etc.)

INCREASE IN A FACTOR WILL CAUSE D CURVE TO SHIFT TO THE RIGHT (↑D)

DECREASE IN A FACTOR WILL CAUSE D CURVE TO SHIFT TO THE LEFT (↓D)

Supply Curve (Factors: sellers, technology, resource prices, etc.)

INCREASE IN A FACTOR WILL CAUSE S CURVE TO SHIFT TO THE RIGHT (↑S)

DECREASE IN A FACTOR WILL CAUSE S CURVE TO SHIFT TO THE LEFT (↓S)

Aggregate Demand Curve

As P increases, AD curve shifts to the left (not buying)

As P decreases, AD curve shifts to the right (buying/spending)

Aggregate Supply Curve

As P increases, AS curve shifts to the right (producing)

As P decreases, AS curve shifts to the left (not producing)

Solutions

Expert Solution

1. Demand Curve

YES, increase in factor(income, no of buyers) will result in shift of Demand curve to the right. This may gives rise to Market price when supply remains the same.

Yes, Decrease in factor will cause Demand curve to shift toward left. As demand contracts the market price will fall down to match new equilibrium price.

2. Supply Curve

YES, Increase in factors(tech,resources) will result in rightward shift in Supply curve as more output wil put pressure on prices when demand remains the same.

Yes, Decrease in factors will result in shift of supply curve to the left, as scare resources and outdated tech or higher cost will make production costly, resluting in higher prices in market, even when demand is same.

Aggregate Demand Curve

Yes you are right here, as increase in price will result in Change in quantity Demanded. people will start to consume less of that good(the Demand curve will shift to the left).

At the same time decrease in price of a good will result in increase in Quantitiy demanded of that product. the curve will shift towards right.

Aggregate Supply curve

Here if price increases, that means the supply will start to increase as there is more profit to earn form higher prices , it will continue to do until it maches with demand level and at last will arive at equilibrium price, where demand = supply.

yes it is tendency of businesses to supply less in the market if price of the product is falling, the curve will shift towards left(mostly it depends on cost factors for business that determine whether they will continue to supply or not at current market prices)

For example right now OPEC(Oil Producting Countries) are cutting supplies of Crude oil to support market price of oil. this shows they dont want to supply oil at lower prices, as it hurts there profitibility. lower demand due to slower growth rate and higher supply of crude oil is putting downward pressure on prices.


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