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The mechanism is call "The Supply and Demand Curve"
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What happens when inflation falls?
Supply & Demand, EconomicsEconomic studies tell us that when the price of a good drops, demand will rise. Furthermore, when the price of a good rises, demand will go down.
What happens when a demand for a good increases when supply decreases?
Down here would be the possible scenarios and its effects If demand rises and supply rises (by the same factor): the prices do not change while the quantity is increased If demand falls and supply falls (by the same factor): the prices do not change while the quantity is decreased If demand falls and the supply rises (by the same factor) the prices would go down while quantity would not change If demand rises and the supply falls (by the same factor) The prices would go up while the quantity would not change.
Price of substitutes and complements vs price of commodities?
Relationship of good price to price of substitutes and complements: 1) Substitutes: as the price of substitutes for a good falls, the price of a good must fall in order to maintain demand. 2) Complements: as the price of complements falls, the price of a good can increase and still maintain the same level of demand.
How does the consumer surplus change as the equilibrium price of a good rises or falls?
As the equilibrium price of a good raises the producer surplus increases as well, and as the equilibrium price falls the producer surplus decreases accordingly.
What will happen to the equilibrium price and quantity of a normal good if the demand for the good increases and supply constant?
the equilibrium price rises and the quantity increases
What happens when inflation falls?
Supply & Demand, EconomicsEconomic studies tell us that when the price of a good drops, demand will rise. Furthermore, when the price of a good rises, demand will go down.
What happens when a demand for a good increases when supply decreases?
Down here would be the possible scenarios and its effects If demand rises and supply rises (by the same factor): the prices do not change while the quantity is increased If demand falls and supply falls (by the same factor): the prices do not change while the quantity is decreased If demand falls and the supply rises (by the same factor) the prices would go down while quantity would not change If demand rises and the supply falls (by the same factor) The prices would go up while the quantity would not change.
What happens when the price of a good drops?
Supply & Demand, EconomicsEconomic studies tell us that when the price of a good drops, demand will rise. Furthermore, when the price of a good rises, demand will go down.
Is luxuries a normal good?
yes it is a normal good . because price rises, demand also rises subject to condition that income rises
What will happen when the price of goods drop?
Supply & Demand, EconomicsEconomic studies tell us that when the price of a good drops, demand will rise. Furthermore, when the price of a good rises, demand will go down.
Price of substitutes and complements vs price of commodities?
Relationship of good price to price of substitutes and complements: 1) Substitutes: as the price of substitutes for a good falls, the price of a good must fall in order to maintain demand. 2) Complements: as the price of complements falls, the price of a good can increase and still maintain the same level of demand.
How does the consumer surplus change as the equilibrium price of a good rises or falls?
As the equilibrium price of a good raises the producer surplus increases as well, and as the equilibrium price falls the producer surplus decreases accordingly.
What will happen to the equilibrium price and quantity of a normal good if the demand for the good increases and supply constant?
the equilibrium price rises and the quantity increases
The price of good rises causing the demand for another good to fall.the two goods are therefore substitutes. do you agree?
Yes
What will happen to demand for a commodity if the price of its complementary falls?
Complement goods are those goods which uses collectively or side by side e.g petrol and cars. If the demand of one good changes then demand of other good move in the same direction. If the price of product complementary falls then the demand of complementary product increases according to the demand law which in turn increase the demand of product. Suppose the prices of petrol falls which will increase the demand of petrol which in turn in increase the demand of cars.
What is an ostentatious goods?
ostentatious good in economics is a good that experience increase in demand as price rises (opposite to "normal" situation). On the Marshall-style diagram it can be showed by uprising demand curve.
How and why does a change in price affect the demand for substitutes?
if the price of a good rises, the demand for its substitute good also rises as well as if the price of a good falls, the demand for its substitute good also falls because substitute goods are those alternative goods which are availabe in the the market if a particular commodity fails to satisfy the consumers. Human being's wants are unlimited and there are only a limited resources to satisfy these wants. Money is supposed to be one of the scarcest resources available. So naturally man tries to make the best us of this resource. That is, he tries to satisfy maximum wants from the money available with him. A person can satisfy one need by utilizing a number of alternative resources. But being a rational individual, he will only use that alternative that is the most cost effective. That is where he has to spend minimum of the scarce resource called money. When the price of a product rises, the individual will look at alternatives ( substitutes ) that are cheaper but give him same satisfaction. The moment he finds an alternative, he shifts to the other product abandoning the use of the product whose price has been increased. Hence the price rise decreases the demand for the commodity whose price has been increased and increases the demand for the substitute product.
