Question

Find a recent news article (within the last six months) which addresses one or more of the sources of demand. Based on the article, describe how the sources are shifting the demand. Is it increasing or decreasing? What is causing it? Will supply be sufficient to meet that demand level?

Answer 1

Hi,

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Question:

Answer:

As per the question here i will discussed about an financial news paper of India last month:

We all know that this time time world is suffering from COVID-19 crisis. Because of this pandemic the global economic, political and social system is affected worst. the economic growth of the country fallen down drastically, people are loosing their job, consumer confidence at very low level, income of the people fallen down. People are very uncertain about the future. So, these all the negative things affected the demand badly and number of companies has bankrupt or facing the financial trouble and the GDP has reached at very low level.

Now we talk about the article:

To reduce the impact of this pandemic situation and boost and recovery of the economic growth the government of India has announced the economic stimulus package of ₹20-lakh-crore. The objective of this package is to improve the condition of land, labour, liquidity and laws. It will cater to various sections, including cottage industry, MSMEs, laborers, middle class, and industries.This package include tax relief for small, micro and medium enterprises and incentives to boost domestic manufacturing as well as attracting investments.

This economic stimulus package of ₹20-lakh-crore will increase the investment and Consumption that will increase the demand level in the economy and demand curve will shift left.

You can understand it by this graph. Assume is at equilibrium at point "E0" where, quantity of demand is "Q0" and price level is "P0". now the government is annonce the economic stimulus package of ₹20-lakh-crore then it will increase the consumption that is contribute more than 60% in aggregate denad and investment level. The increasing consumption and investment will increased the demand in the economy and demand curve will shifted left from "D0D0" to "D2D2" and that will increased the quantity of demand from "Q0" to "Q2" and price will increased also from "PO" to "P2".

In short run run supply level will not change because in short run the supply of work force, price of output and production capacity will constant. But in medium and long run supply level will increased and sufficient to meet that demand level be because in long or medium run the supply of work force, price of output and production capacity will increase.

Please find the attached graph.

Thank You