Document on Demand and Supply
Added on 2020-02-24
5 Pages1031 Words69 Views
Answer 1a.The graph for demand and supply curves is shown below. The demand curve slopes down while supply curve slopes upwards.b.Using the demand-supply approach, we determine equilibrium where demand equals supply. At this point shown by green drop lines price =$5 and quantity Q= 24. We can see this from the table that shows Qs=Qd=24 when P= 5c.we show new demand by (old demand +4), as shown in last coloum of the table below:PQDQSnew demand 8123616716322062028245242428428203233216362361240140844
d.As we can see the new equilibrium is at a higher price of 5.5 and quantity of 26.Q2.We use the demand supply approach to show a price of $1200 and 400 houses on rent below. A ceiling is imposed as a horizontal line at 1000. No one can pay a rent or take a rent of more than 1000. This is an effective ceiling as it is below the free market level. (Heffernan,2015)At P= 1000 there is disequilibrium as demand > supply. The difference is called excess demand or SHORTAGE. Consumers demand Q1 houses on rent but owners are willing to rent only Q2 houses. A shortage = Q1-Q2. This makes some renters happy- Q1 renters will be happy as they pay less than 1200 now. But those who are without a rented house= Q1-Q2 renters will be unhappy. Overall the
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