Economics Assignment

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name f the student
Name of the university
Author Note

1ECONOMICS ASSIGNMENT
Table of Contents
Answer 1:...................................................................................................................................2
Answer 2:...................................................................................................................................4
Answer 3:...................................................................................................................................6
References:.................................................................................................................................9

2ECONOMICS ASSIGNMENT
Answer 1:
Under a perfectly competitive market of cherries, the impact of excess production of
this product can be analyzed with the help of market demand and market supply curve. To
describe the nature of both curves, it is assumed that other factors, for instance, income, tastes
and preferences of consumers, price of related products and weather, which can influence
both demand and supply of cherries, have remained constant (Kalcheva, McLemore and Pant
2018). Hence, the changes of quantity demanded and quantity supplied of cherries can be
measured with the changes of its own price. The market demand curve under this perfect
competition is a downward slopping line that represents an inverse relation between prices
with its quantity demanded (Dueñas, Leung, Gil and Reneses 2015). This means an increase
in price of cherries can decrease its market demand while the opposite situation can also be
occurred. On the other side, the market supply curve of cherries is an upward sloping line,
which indicates an increase in price of this product can influence its producers to supply more
cherries in market. Hence, the equilibrium amount of this specified product and its
corresponding equilibrium price can be obtained with the help of these two curves when they
equate with each other.

3ECONOMICS ASSIGNMENT
Figure 1: Change in equilibrium price and quantity of cherries
Source: (created by author)
According to figure 1, the market demand curve of cherries is represented by D0 line with a
negative slope. On the other side, the initial market supply curve of this product is
represented by S0 line, which has a positive slope. Hence, Qe represents the equilibrium
amount of cherries in the market while corresponding equilibrium price is represented by Pe.
After the bumper-growing season, the total amount of cherry production has increased
significantly; that in turn has led the supply curve to shift rightward (Greenwood and
Vayanos 2014). This implies that at the same price level, producers can supply more amounts
of cherries. This phenomenon is represented in the above diagram, where S1 represents the
new supply curve of cherries and consequently the equilibrium amount of that product has
changed along with its price. As supply of cherries increases with its stable market demand,
the equilibrium amount of that product has increased by Qe Q1 unit while the market price has