Question

Relationship between Price, Quantity Demanded and Quantity Supplied

There is an inverse relationship between price of a good and the quantity demanded and a direct relationship between the price of a good and the quantity supplied. For example, an increase in the price will cause a decrease in the quantity demanded and an increase in the quantity supplied.

Choose a good or service and speculate how the quantity demanded or supplied will change with a given change in price. (Pick any good or service…. plumbers, teachers, gasoline, butter, eggs, etc.)

Answer 1

The relationship between quantity supplied and price is easily seen in case of services. Teachers are willing to work for more number of hours if the services are valued more. This implies that if they are deceiving a higher income then they will probably work for more number of hours at least to an extent. Similarly producers of commodity such as butter eggs are likely to increase the quantity of the products they are selling when they are receiving a higher price because it increases their revenue. There for a change in the price is directly related with a change in the quantity supplied

Consumers are always constrained by their income so that whenever they are trying to purchase a good and its price in pieces they are not able to purchase the same quantity. They have to reduce their purchase because they are bound by their Limited income. It indicates that is the price of a commodity increases the quantity demanded of a good will have Falls at least for goods that are satisfying the law of demand. Therefore the change in the price of a good is associated with a change in the quantity demanded in an inverse relationship.