Unit 2 Graph Analysis Two

Any change that lowers the quantity that buyers wish to purchase at any given price shifts the demand curve to the left.

A downward-sloping demand curve is formed in the form of monopolistic competition. If the average total cost is below the market price, the firm is earning a profit. Meanwhile, if the average total cost is above the market price, the firm is earning a loss. If the price is tangent to the average total cost, the firm is earning a zero profit (breakeven).

Supply and demand is a fundamental element of economics; it is the main support system of a market economy. Demand can be interpreted by the quantity of a product or service a consumer is desired to acquire at a given time period. Quantity demanded is the amount of product consumers are willing to purchase at a given price; the relationship between price and quantity demanded is commonly known as the demand relationship. Supply however, accounts for how much a market produces for consumers. The quantity supplied refers to the actual amount of a certain good firms are willing to supply to consumers when receiving a certain price. Having limited resources we all have to

2.) Which curve(s) change and based on the lists in the text of what causes demand and supply to shift what are the causes of theses shifts? D1 changed moving leftward indicating a decrease in demand due to a technological change: a technological setback causes a decrease. This causes price to go down as well as the demand is lower.

In any given market, the relationship between supply and demand will reach a natural equilibrium. The supply is determined by the producer of the goods or service. The consumer sets the demand. Consumers are less willing to purchase a good or service at a high price and more likely at a low price. Similarly, producers are less motivated to sell a good or service at a low price and more willing to sell it at a high price. These two opposing positions naturally balance out at the point which the producers are willing to sell their product, and the consumers are willing to purchase it. Once reaching this point, the relationship between supply and demand has achieved a natural equilibrium (McEachern).

To summarize the concept, when the price of a product falls, the quantity demanded of the product will increase, and conversely, when the price of a product increases, the quantity demanded of the product will decrease, where all other relevant factors are constant. (Glen, 2012).

According to OpenStax, Principles of Economics it can be a change in income, population, tastes, prices of substitutes or complements, or expectations about future prices. All these variables modify the amount of demanded product at all costs. It is possible that the demand curve shifts to the left or the right. The movement to the right happens when the amount of required good is increased at any price compared to the initial position. Conversely, a shift to the left occurs when the amount of demanded good is decreased at all costs compared to the original position.

The behavior described in the Headline on p. 131 is one in which numerous firms have entered the marketplace and driven the price of the product down. The graph below illustrates what happens to the market supply curve as new firms enter the industry. The curve shifts to the right which illustrates a drop in price.

Earlier I stated that economics is concerned with consumption and production. We can look at it in the terms of demand and supply. It is simply the quantity of a good buyers wish to purchase at each conceivable price. Three factors determine demand:

A change in anything that affects supply besides price causes a shift on the supply curve. Factors that affect the supply curve are; price of inputs, technology, expectations, and taxes and subsidies. If a producer finds that the cost for producing specific items is getting higher than supply of that item will begin to decrease as it is not economically sound to continue to make a large amount of these items. Technology has a direct affect on supply, as it becomes easier and less expensive to produce an item more of that item is produced. As with the demand curve expectation also has an affect on the supply curve, if consumers expect the cost of a product to increase they will buy more of that items which causes a decrease of supply. An example of this would be when the price of gas is expected to raise people will fill their car up and also fill gas containers. Tax also has an effect on the supply curve as it does on the demand curve, as taxes increase on a specific items then the supply for that particular items increase as people stop purchasing the item.

The world runs on the concept of supply and demand. Supply and demand are the key concepts in the economist theory. Supply is simply how much of a product that the market can make and offer to consumers for a certain price. The supply can depend on resources of the producer or how willing they are to produce it. While, demand is how much the consumers insist on paying for a product or service (cite website1). As I stated before, the world runs on this economic theory. Economics is not a concept limited to more advance societies such as the United States. In all countries economist are investigating the relationships between price and quantity in-regards-to both supply and demand, the demand curve, market demand and there variables, the supply curve, and shifts that occur.

Supply curves are usually indicated an upward-sloping curve. The slope of the supply curve shows that as the price goes up, producers are willing to produce more goods. When prices rise based on an increased demand for an item, companies will find it more profitable to increase the quantity supplied of the item, the supply curve will slope upward from left to right. When a price changes, the quantity supplied will change with it. The movement along the same supply curve. When there are factors other than price changes, the supply curve will shift. If the demand for an item falls, it only makes sense for a company to decrease their supply to minimize their loss. Obviously, a company would rather sell at a higher price than at a lower price to maximize profit.

The Equilibrium price is set when the supply and demand meet when the quantity demanded by the customer (market demand) and the quantity that the companies (suppliers) are willing to supply the goods/services.

In economics the supply of a product is represented by a supply curve. The law of supply states that there is a positive relationship between supply and price, and as such the supply curve is a positive slopping curve. Producers will supply a larger quantity of a product as the price of the product rise and when there is an improvement in technology that makes it possible for producers to achieve a lower per unit cost. They will increase the supply and the supply curve will shift to the right. The decreasing in price and the higher costs of production will decrease the quantity of goods supply, which will cause a shift in the entire supply curve to the left. The higher cost of the factors of production and Government taxes will increase the cost of supplying a product and as such will reduce the market supply of that product. The main factors that determine supply includes; the number of suppliers of the product, the producer expectation of future prices and the cost of producing the product. In a perfect markets system, supply in determined by the

1. Consumer Income Pepsi is a normal good, so when consumers get more income, they normally consume more Pepsi at any given price. The demand curve shift to the right. Inversely, when consumers get less income, they decrease their consumption of Pepsi. Because of the change in income, the demand curve will shift to the left.