Question

I have a question regarding supply and demand in microecconomics.

For example, when there is population growth, does demand shifts to right? and when gas price increases, does it affect supply or demand? also, does supply shifts to left due to iincreased gas price?

Please let me know as soon as possible.

Answer 1

Yes, when there is a population growth, the Demand curve shifts to the right.

Explanation- When the quantity demanded of a commodity changes because of a change in factors other than the own price of the commodity, it is called change in demand. A change in demand causes the demand curve to shift. A shift of the Demand curve indicates that more or less quantity is being demanded at the same price. As population increases, the price of the commodity remaining the same, more number of people demand the commodity and demand increases. As such, the demand curve will shift to the right indicating that at the same price more quantity is being demanded.

When gas price increases, it does affect supply and demand.

Explanation- A change in the price of gas would affect the supply and demand of gas. Price is a determinant of demand and supply. According to the the law of demand, an increase in the price would lead to a decrease in the quantity demanded of gas. As such, the quantity demanded of gas will reduce. According to the law of supply, an increase in the price of gas would lead to an increase in the supply of gas. As such, the quantity supplied of gas will increase.

No, supply curve does not shift to the left because of increased gas price.

Explanation- first we shall understand the difference between change in quantity supplied and change in supply.

Change in quantity supplied- When the quantity supplied of a commodity changes because of a change in its own price, other factors affecting the supply remaining the same, it is called change in quantity supplied. An increase in the price would lead to an increase in the quantity supplied and a decrease in the price would lead to a decrease in the quantity supplied. Change in quantity supplied causes a movement along the supply curve.

Change in supply - When the quantity supplied of a commodity changes because of a change in factors other than the own price of the commodity, it is called change in supply. Here, the own price of the commodity remains the same. A change in supply causes the supply curve to shift indicating that more or less quantity is being supplied at the same price.

Now, an increase in the price of gas would lead to change in quantity supplied( as price has increased). Hence, an increase in the price of gas would cause a movement along the supply curve. The supply curve will not shift to the right .