Question

PLEASE COMPLETE ON WORD

1) DRAW & EXPLAIN the current supply and demand curve for any given product

ex .draw the supply and demand for Nike shoes

2)  DRAW & EXPLAIN at least 10 SEPERATE examples of various determinants that will effect Supply and any shift that occurs in the equilibrium - say what the determinant is, how it will affect supply or demand, and then draw the shift in supply or demand.

ex. Draw explain why wages might increase for their workers, how the supply curve shifts to the left, and how equilibrium changes.

3) DRAW & EXPLAIN at least 10 SEPERATE and NEW examples of various determinants that will effect Demand  and any shift that occurs in the equilibrium  - say what the determinant is, how it will affect supply or demand, and then draw the shift in supply or demand.

Answer 1

1) Demand: Demand for a commodity refers to the desire to buy a commodity backed with sufficient purchasing power and the willingness to spend.

Supply of a commodity refers to a schedule showing various quantities of a commodity that the producers are willing to sell at different possible prices of the commodity at a point of time.

2) Price of related goods: The supply of a good depend on the price of related goods. Example: Consider a firm selling tea. If price of coffee rises in the market, the firm will be willing to sell less tea at an existing price. Or, it will be willing to sell the same quantity only at a higher price. It causes shift of supply curve either rightward or leftwards. Supply of Nike shoes increases when price of substitute of Nike shoes decreases i.e. price of reebok shoes, puma shoes decreases because prodution of Nike gives more profit to firms.

Number of firms: Market supply of a commodity depends upon the number of firms in the market. An increase in the number of firms implies an increase in market supply and vice-versa. It causes shift of supply curve either rightward or leftwards. Increase in number of firms producing Nike shoes leads to increase in supply and vice-versa.

Price of factors of production: If the factor price decreases, the cost of production reduces. Due to this more of the commodity is supplied at its existing price. Inversely, increase in factors price increases the cost of production and lead to less supply of commodity. It causes shift of supply curve either rightward or leftwards. When price of raw material used in the production of shoes decreases then its supply increases and vice-versa.  

Change in technology: Improvement in the technique of production reduces the cost of production and increases supply and vice-versa. It causes shift of supply curve either rightward or leftwards. When there is technology advacement occurs in the production of shoes then also its supply increases otherwise decreases.

Government policy: Taxation and subsidy policy of the government affects the market supply of the commodity. An increase in taxation tends to reduce supply. On the other hand, subsidies tend to increase in the supply of commodity. It cause shift of supply curve either rightward or leftwards. If government provide subsidy for producing Nike shoes then its supply increases and causes rightward shift of supply curve.

Increase in supply or rightward shift of supply curve: It causes increase in equilibrium quantity and decreases price.

Decrease in supply or leftward shift of supply curve: It causes decrease in equilibrium quantity an increases price.

3) Price of related goods: Demand for a commodity is also affected by the change in the price of related goods like substitute goods or complementary goods. Substitute goods are those goods which are used in place of one another. Increase in the price of one good increases the demand of other good and vice-versa. On the other hand, complementary goods are those goods which jointly satisfy a particular want of consumer. An increase in the price of one good decreases the demand of other good. It causes shift of demand curve either rightward or leftwards. Increase in the price of substitute of Nike shoes causes increase in Nike shoes demand.

Income of the consumer: Increase in the income of consumer increases the demand of normal good while reduces the demand of inferior goods. It causes shift of demand curve either rightward or leftwards. Increase in the income shifts the demand curve rightwards and vice-versa. Increase in income increases demand of Nike shoes and vice-versa.

Taste and Preference of the consumer: If consumers have favorable taste and preference for the good then demand of that good increases and vice-versa. If consumers have favourable taste and preference for the good then demand curve shifts rightwards and unfavorable taste for the commodity shifts it leftwards. Favourable taste and preference of consumers towards Nike leads to increase in its demand and vice versa.

Expectation: If people expect that price of a commodity will reduce in near future then people demand less number of goods today and as a result, demand decreases and causes the demand curve to shift leftwards. When people expect that price of a commodity will increase increase in near future than present consumption increases and leads to rightward shift of demand curve. If consumers expect that price of Nike shoes will increase in near future then current demand of Nike shoes increases.

Decrease in demand or leftward shift of demand curve: It causes decrease in equilibrium price and quantity.

Increase in demand or rightward shift of demand curve: It causes increase in equilibrium price and quantity.