Microeconomics: Business Types, Supply, and Demand
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1. Explain why there is an inverse relationship between quantity demanded and price. Explain why there is usually a direct relationship between quantity supplied and price.
2.What are the weaknesses and strengths of the various forms of business? Why do corporations tend to be so much larger than sole proprietorships or partnerships? Why is it so difficult to determine the objectives of the government?
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Solution Summary
Using the provided questions, review of supply and demand and relationships to price, business types and advantages and disadvantages, and government objectives.
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1. Explain why there is an inverse relationship between quantity demanded and price. Explain why there is usually a direct relationship between quantity supplied and price.
For the inverse explanation, it is easier to use the price changes as the focus. As prices RISE, the demand drops. This occurs in most cases for most products. Some products and services, people will buy no matter the price, but in most cases, the price does affect the amount sold in an inverse manner, demand increase when prices go down. For example, the price of noodles goes down in price. People will demand more because the price is less and they can therefore buy more.
However, quantity supplied is not the overall supply. Quantity supplied it the amount of goods supplied by the provider at a specific price. So when the price decreases, the supplier supplies fewer products. When the price increases, the supply also increases. This could be because the costs are cheaper to produce (think economies of scale).
2. What are the weaknesses and ...
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