Question

 

Discussion topic: Recognize how changes in supply and demand affect market outcomes and explain the effect of government regulation on prices?

Use your own words and be sure to support your statements with logic and arguments.

Answer 1

First of all you must clear with what is change in demand & change is supply

change in demand

It means to increase or decrease in quantity demanded of a commodity when is change in other determinnant of demand(such as-income of the consumer,taste & preference etc.)other than price if the same commodity.It is expressed through shifts in demand curve-forward shift or backward shift.

Now how it affect market outcome-if there is an increase in demand it lead to increase in the equilubrium price as well as in outcome.if demand decreases because of change in other determinants then equilbrium price & market outcome also decreases.

Change in supply

refers to increase or decrese in quantity supplied of a commodity in response to change in other determinants of the supply(such as-numbers of firms,goals of firm,govt.policy etc.)other than price of a same commodity.It is expressed through shifts in supply curve-forward shift or backward shift.

Now affect of change in supply on market outcome:-if supply increase then market outcome or equilibrium price decrease or vice versa.

But if demand & supply both are changes in opposite direction affect on equilibruim can be recognise but its affect on market outcome cannot be recoginsed.

Affect of Government regulation on prices:-which means control on price if government regulate a high price policy to sector or a firm it leads to increase in supply or dimnish in demand.On the other hand if govt. regulate low price policy to a firm it reduces the supply & increases the demand of product.Government regulate it by imposing taxes or offering subsidies.