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A Discussion of Supply & Demand

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Just looking for a paragraph or so for each of the 4 questions below to get a discussion going:

1) Discuss some important aspects of the free enterprise system or capitalism.
2) Why are price and competition so important for the free enterprise economic System?
3) List and describe two or three goods and/or services that you think their prices have been affected by supply and demand in recently.
4) Should there be a minimum wage? Should there be a "living wage"? What are the costs and benefits of a minimum wage or living wage? How does a minimum wage affect the demand for labor? How does it affect the supply of labor? (think about the supply and demand equilibrium model) How will a living wage affect the overall demand in the economy ? (think about the circular flow model) Can you find some sources to support your position?

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I have outlined a response for you. If you have any further questions or need clarification, please ask.

1) Discuss some important aspects of the free enterprise system or capitalism.
The free enterprise system works under the assumption that people will buy what is available, using the elements of price and need. Supply will meet demand and when supply is lower than demand, prices will rise if people are seeking the product or service. If supply exceeds demand, then the prices will be lower. Those that provide the product or service for the best price will obtain the customers who will buy the product. Supply and demand are both based on the customer demand for the product. In a free market system, there are few requirements on business and government or public companies are limited in number.

2) Why are price and competition so important for the free enterprise economic System?
Price is the point where people are willing to purchase a product or service. If the price is too high, fewer people will buy the product. If the price is too lower, many will buy it, but such pricing invites competition who see the number of customer a product has. Companies compete for customers. To do this they must provide a good product at a good price, or the customer will go to another company to buy.

3) List and describe two or three goods and/or services that you think their prices have been affected by supply and demand in recently.
Two years ago, the supply of oranges and other citrus fruit was down due to an unexpected weather ...

Solution Summary

A review of some of the elements of free market systems including pricing, competition, supply and demand, and wages.

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See Also This Related BrainMass Solution

Opportunity Costs and Perfect competition

Problems:

1. Explain how opportunity cost is related to the producer's supply curve.

2. Explain why the minimum price necessary rises as the producer produces more output.

3. Define profit.

4. What are the assumptions of a perfectly competitive market.

5. Describe the demand curve faced by the individual firm. Draw the individual firm's demand curve.

6. Describe the short-run and the long-run.

7. Define diminishing marginal returns. Define marginal product. Explain why diminishing returns occur.

8. Define fixed costs, variable costs, marginal cost, and total costs.

9. Explain how the firm decides whether or not to shutdown.

10. Define average total cost and average variable cost. Calculate ATC, AVC, and MC from the following:

Workers Output Fixed cost Variable cost
per day per day ($/day) ($/day)
0 0 40 0
1 80 40 6
2 200 40 12
3 260 40 18
4 300 40 24
5 330 40 30
6 350 40 36
7 362 40 42
11. If the price per unit of output is 62 cents per unit what will be the profit-maximizing output level?

12. If the wage is $12 per day, instead of $6, and the price is 35 cents per unit, what will be the profit-maximizing output?

13. Draw a graph of MC, ATC, AVC, and price. Find the profit-maximizing output level graphically. Find the area representing profit on the graph.

14. Define producer surplus. Show the area representing producer surplus on a graph.

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