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Change in Demand - Economics Assignment

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Added on  2020-03-23

Change in Demand - Economics Assignment

   Added on 2020-03-23

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Answer to question 1The difference in a change in quantity demanded of X and a change in demand of X are based on a difference in what causes the. The reason for a change in quantity demanded of X is a change in own price of X. Assume the demand curve is DD and we are at A. When the price of X rises from P1 to P2, we move from A to B. the new point shows price of P2 that consumers are willing to pay for Q2. This change from Q1 to Q2is the result of change in price of X and is referred to as a decrease in quantity demanded of X. It is shown as a movement ALONG the demand curve. The reason for a change in demand of X is a change in other determinants of demand for X. These determinants include- income level, and price of a related good (substitute or complementary good).A change in these determinants can cause the demand curve to shift out (if demand increases) or inwards ( if demand decreases) . both cases are shown below. Answer to question 2In this question we have 4 stepsIdentify the effect of change- is it demand or supply that is affectedDirection of change- increase or decreaseGraphical presentation of changeEffect on price and qty. (a)The event is a fall in price of solar panels. This affects demand. It is shown with an initial equilibrium at A with price P*. The lower price causes a increase in quantity demanded, shown by point B. We move from A to B on the same demand curve. At B the consumer is
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willing to pay P1 but there is inadequate supply – a SHORTAGE exits. B is not an equilibrium point. (b)The event is a rise in price of electricity. We must find a connection between solar panels and electricity. electricity solar energy solar panels. It is common sense that thesegoods are related as substitutes of each other. A change in price of as substitute good will affect demand. As price rises, electricity will be replaced by other forms like solar power. An increase in demand for solar power is translated into increase in solar panels demand. This isshown by movement OF the demand curve. An increase in demand is seen as a right shift of demand curve. As result we end up with shift of equilibrium from E to E2 where price and quantity are higher . (c)Higher productivity affects supply and not demand. It allows more production of panels so that we see an increase in supply of panels. The supply curve shifts down from S1 to S2. As
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result we end up with shift of equilibrium from E to E3 where price is lower but quantity is higher . Answer to question 3We need to separate the facts in the question in terms of their effect on demand/supply of watermelons. We are told that Demand is higher in summers. Supply is higher in summers. Price in summer is lower than in winter.We can put together these information in a diagram. As shown Ps < Pw (subscripts denote seasons) because of interaction between demand and supply in each season. A simple higher demand in summers may not necessarily lead to higher prices, if it is matched by
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