ECON 1001 Lecture Notes - Lecture 7: Equilibrium Point, Economic Equilibrium, Demand Curve

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rubyllama377

27 Mar 2018

School

Department

Economics

Course

ECON 1001

Professor

Erhardt

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Increase or decrease in supply of a commodity does not cause any change in it"s price if the demand of a commodity is perfectly elastic. Only the equilibrium level of quantity demanded and supplied changes and is directly related with change in supply. The equilibrium point is e. when the supply increases the supply curve shifts to the right and the new supply curve is s1s1. The equilibrium price remains the same and the quantity increases from oq to. Oq1 and the equilibrium point shifts to e1. In the above figure pd is the demand curve which is perfectly elastic and the original supply curve is ss. The equilibrium point is e. when the supply decreases the supply curve shifts to the left and the new supply curve is s1s1. The equilibrium price remains the same and the quantity decreases from oq1 to. Oq and the equilibrium point shifts to e1.

Related Questions

6. The price of a particular good rises by a small amount, and as a result the total amount of money spent purchasing this good decreases. We can conclude that: (A) In the neighbourhood of the original price, the supply curve of this good is elastic (B) In the neighbourhood of the original price, the supply curve of this good is inelastic (C) In the neighbourhood of the original price, the supply curve of this good is perfectly elastic (D) In the neighbourhood of the original price, the supply curve of this good is perfectly inelastic ((E) In the neighbourhood of the original price, the demand curve of this good is elastic (F) In the neighbourhood of the original price, the demand curve of this good is inelastic (G) In the neighbourhood of the original price, the demand curve of this good is perfectly elastic (H) In the neighbourhood of the original price, the demand curve of this good is perfectly inelastic (1) In the neighbourhood of the original price, the demand curve of this good is unit elastic (J) None of the above

I would greatly appreciate a systematic approach on how I should attack this information. I'm not sure what I'm solving for or what is simply given.

we have charted a demand curve D1 whose equation is Q = 27 - 3P. The equation for the supply curve S1 is Q = -5 + 5P. The resulting equilibrium price is $4 and quantity is 15 units (point 1).8 If we chart another, considerably more elastic, demand curve, D2, of the form Q = 55 - 10P, with the same supply curve, the equilib- rium point will be the same, Q = 15, and P = 4. Now, let us say that supply increases, and the supply curve S2 is of the form S = 0 + 5P. With the new supply curve, the equilibrium points for the two demand curves will no longer be the same. With D1 the price will be $3.375 and quantity 16.875 units (point 2). However, with D2 the result will be P = 3.667 and Q = 18.333 (point 3). The more elastic demand curve, D2, has resulted in a smaller price decrease but a larger quantity increase than D1, the less elastic curve.

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3. The price of a particular good falls by a small amount, and as a result the total amount of money spent purchasing this good decreases. We can conclude that: (A) In the neighbourhood of the original price, the supply curve of this good is elastic (B) In the neighbourhood of the original price, the supply curve of this good is inelastic (C) In the neighbourhood of the original price, the supply curve of this good is perfectly elastic (D) In the neighbourhood of the original price, the supply curve of this good is perfectly inelastic E) In the neighbourhood of the original price, the demand curve of this good is clastic (4) In the neighbourhood of the original price, the demand curve of this good is inclastic (G) In the neighbourhood of the original price, the demand curve of this good is perfectly elastic (H) In the neighbourhood of the original price, the demand curve of this good is perfectly inelastic (1) In the neighbourhood of the original price, the demand curve of this good is unit elastic (J) None of the above

ECON 1001 Lecture Notes - Lecture 7: Equilibrium Point, Economic Equilibrium, Demand Curve

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