Question

Graphing:

1. Demand Model:

1. Define the law of Demand slide 4
2. llustrate an increase, decrease in quantity demanded - list the factors that are held constant in order to observe the change in quantity demanded.(ceteris paribus assumptions/ demand shifters) slide 10 and slide 11 ( graph), (slide 14 demand shifters)
3. Graph an increase, decrease in demand. Use an example of one of the non-price determinants of demand listed in 'a' and explain how it would cause demand to increase and decrease ; what is the ceteris paribus assumption when there is a change in demand slide 11

2. Supply Model:

1. Define the law of supply slide 20
2. Illustrate a decrease,increase in quantity supplied - list the factors that are held constant in order to observe the change in quantity supplied. (ceteris paribus assumptions/ supply shifters) graph sl 26-27
3. Graph a decrease in supply. Use an example of one of the non-price determinants of supply listed in 'a' and explain how it would cause supply to increase or decrease sl 28-29

4. Consumer and Producer Surplus

1. Graph a market in equilibrium and identify the area of consumer surplus and define concept; identify area of producer surplus and define concept (consumer surplus sl 33-35; producer surplus sl 36-37)
2. What is the formula for finding the area of consumer/producer surplus Formula: slide 39
3. Graph an example showing producer surplus and consumer surplus and find the area of each (use any numbers you choose)
4. If there is an increase in demand in the marketplace, what is the impact on consumer surplus as a result of the change in price at the new equilibrium? Impact from a decrease in demand? Use slide 40

Answer 1

1. a) Other things remaining the same, with a rise in the price of the commodity, its demand contracts and with fall in the price, its demand extends. This inverse relationship between the price of a commodity and its demand is called Law of Demand.

b) When demand of a commodity changes due to change in its own price than it is known as change in quantity demanded and it leads to movement in the demand curve. Factors that remains constant are Price of related goods, Income of the consumer, Taste and Preference of the consumer, Expectation of the consumer.

Contraction of Demand; Increase in price of good leads to upward movement of demand curve.

Expansion of Demand; Decreases in price of good leads to downward movement of demand curve.

c) When demand of a commodity changes due to change in factors other than price than it is known as change in demand and it leads to shift of demand curve either rightward or leftward.

Price of good itself remains constant under change in demand.

Determinant of demand which causes change in demand are Income of the consumer, Price of related goods, Taste and Preference of the consumer, Expectation of the consumer.

Increase in income of consumer increases the demand of good and shifts demand curve rightwards. This shows increase in demand.

Decrease in income of consumer decreases demand of good and this causes leftward shift of demand curve. This shows decrease in demand.