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Which of these statements refers to the law of supply?
producers will supply as the good price Producers will supply more of a product as the price goes up. A+
What does a raise in the price of a product cause?
The rise in the price of a product is going to cause: 1. consumer demand of product to decrease 2. producers supply decreases 3. equilibrium price is uncertain because both demand and supply are shifting However if demand grows relatively more than supply, price will rise, but if supply grows relatively more than demand, price will fall.
What is the effect of taxation on the supply and demand on equilibrium price?
The imposition of a tax on the commodity (or even on the factor of production) translates into increased costs of production for the producers. This is because the producers would require much more to produce a given unit of that commodity. In response to the law of supply, the quantity supplied of that commodity will decrease arising from increase in costs of production. This is equivalent to an in-ward or up-ward shift of the supply curve, from the original equilibrium position. The market re-gains equilibrium with a new higher equilibrium price and lower equilibrium quantity. The producer, however, has to compensate him or herself by adding the amount of the tax to the supply price. This suggests that the incidence of the tax is shared by both consumers and producers. The consumers pay the tax in form of increased prices of the commodity while producers will pay the tax in form of increased costs of production. The proportion of the tax paid by either the consumer or producer depends on the price elasticity of demand for the commodity. Ceteris paribus, the more price inelastic the demand for the commodity, the bigger the proportion of the tax paid by the consumers and vice versa.
Explain why the price in competitive markets down at the equilibrium intersection of supply and demand explain what happens if the market price starts out too high or too low?
The effects of supply and demandAccording to the law of demand, as the price for an item goes up, the quantity demanded by people goes down, and as the price goes down, the quantity demanded goes up. On the other hand, from the producers point of view (the law of supply), if he's making more profit, he'll want to make more, and if he's making less profit he'll want to produce less of it.So as the price and profit goes up, the quantity supplied goes up also.Therefore the best amount to charge is the equilibrium price; where the consumer will be happy to buy it and the producer will be happy to sell it.That is why the price in competitive markets settles down at the equilibrium intersection of supply and demand.If the market price starts out too high, there will be little demand since it will be so expensive, and if the market price starts out too low, there will be little supply, because the producers are not gaining much profit from it.
What will happen to consumer and producer surplus when a price floor is eliminated?
If the price floor was set below the equilibrium price, then the removal of this price floor would have no effect on producer and consumer surplus. If the price floor was set above the equilibrium price for that product, then prices with shift down again to the equilibrium price. Consumers would want to buy more, and producers would want to sell more, until they reach the equilibrium price and quantity. In other words all surpluses of deficits would eventually disappear.
Which of these statements refers to the law of supply?
producers will supply as the good price Producers will supply more of a product as the price goes up. A+
What does A raise in the price of a product causes?
The rise in the price of a product is going to cause: 1. consumer demand of product to decrease 2. producers supply decreases 3. equilibrium price is uncertain because both demand and supply are shifting However if demand grows relatively more than supply, price will rise, but if supply grows relatively more than demand, price will fall.
What does a raise in the price of a product cause?
The rise in the price of a product is going to cause: 1. consumer demand of product to decrease 2. producers supply decreases 3. equilibrium price is uncertain because both demand and supply are shifting However if demand grows relatively more than supply, price will rise, but if supply grows relatively more than demand, price will fall.
What is the effect of taxation on the supply and demand on equilibrium price?
The imposition of a tax on the commodity (or even on the factor of production) translates into increased costs of production for the producers. This is because the producers would require much more to produce a given unit of that commodity. In response to the law of supply, the quantity supplied of that commodity will decrease arising from increase in costs of production. This is equivalent to an in-ward or up-ward shift of the supply curve, from the original equilibrium position. The market re-gains equilibrium with a new higher equilibrium price and lower equilibrium quantity. The producer, however, has to compensate him or herself by adding the amount of the tax to the supply price. This suggests that the incidence of the tax is shared by both consumers and producers. The consumers pay the tax in form of increased prices of the commodity while producers will pay the tax in form of increased costs of production. The proportion of the tax paid by either the consumer or producer depends on the price elasticity of demand for the commodity. Ceteris paribus, the more price inelastic the demand for the commodity, the bigger the proportion of the tax paid by the consumers and vice versa.
Explain why the price in competitive markets down at the equilibrium intersection of supply and demand explain what happens if the market price starts out too high or too low?
The effects of supply and demandAccording to the law of demand, as the price for an item goes up, the quantity demanded by people goes down, and as the price goes down, the quantity demanded goes up. On the other hand, from the producers point of view (the law of supply), if he's making more profit, he'll want to make more, and if he's making less profit he'll want to produce less of it.So as the price and profit goes up, the quantity supplied goes up also.Therefore the best amount to charge is the equilibrium price; where the consumer will be happy to buy it and the producer will be happy to sell it.That is why the price in competitive markets settles down at the equilibrium intersection of supply and demand.If the market price starts out too high, there will be little demand since it will be so expensive, and if the market price starts out too low, there will be little supply, because the producers are not gaining much profit from it.
What will happen to consumer and producer surplus when a price floor is eliminated?
If the price floor was set below the equilibrium price, then the removal of this price floor would have no effect on producer and consumer surplus. If the price floor was set above the equilibrium price for that product, then prices with shift down again to the equilibrium price. Consumers would want to buy more, and producers would want to sell more, until they reach the equilibrium price and quantity. In other words all surpluses of deficits would eventually disappear.
In a market economy a high price will usually cause?
producers to supply more and consumers to buy less.
Why the aggregate supply curve has its particular shape?
The aggregate supply curve is positively sloped because at a higher price level, producers are more willing to supply more real output.
How supply and demand affect prices of products and services?
Supply and demand influence market price in various ways. The best known way is when demand is high the price of supply tends to go up. When there is a large amount of supply and demand is low or normal the price of supply tends to go down.
What can you say about supply and demand relationship?
They are largely unrelated unless one includes price into the equation. In the long run, it would be plausible to suggest that as demand rises, supply will rise because producers will see an opportunity for profit (this would really only occur outside of equilibrium and is the process that returns a market to the equilibrium point). It would be simplistic to say that as demand rises so does supply (although this is true) because both are more of a function of price and quantity demanded/supplied than of each other.
Why producers are price takers and not price makers?
Producers are not strictly price-takers. Generally, the more competitive a market is, the less pricing power a firm has, and the more of a price-taker it is than a price-maker. Since basic economic analysis usually focuses on a perfectly competitive market, a producer is a price-taker because it cannot change its price from the equilibrium condition Price = Marginal Cost = Marginal Revenue because it will be undersold by its competitors if it raises it price.
Why does the supply curve slope upwards?
as prices fall supply drops off but demand increases. as prices rise supply increases but demand falls. the system is auto correcting. i'm assuming perfect competition for the following examples (which is when there are many competitors in a market with no product differentiation and no one competitor can set the price of the market and is subject to market forces. think like wheat or corn). if the price of the product is low demand will be high (demand will be low because the prices are low and the consumer will always seek the lowest price ) but supply will be low (this is because the producers always seek the highest possible price). the producers wont be maximizing their profits if they produce when demand is low. but conversely if prices are high demand will be low (remember the consumer is always seeking the lowest possible price) and supply will be high (because the producers will want to maximize profit and make more when the price is high). one condition neutralize the other. the market will alternate between the two conditions each time swing closer to equilibrium (the point at which the supply and demand curves intersect). equilibrium is the most effecent point in the market.
