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    Effect of Cancellation of Orders on Demand

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    Steel producers expect to cut output by 10 percent in 2009 in response to cancelled orders from construction companies and car and household appliance producers. (Source: Financial Times, December 28, 2008.)

    - Does the cancellation of orders change the demand for steel, the quantity demanded, the supply of steel, or the quantity supplied?
    - What happens to the equilibrium price of steel?
    - Draw a graph to illustrate

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    Solution Preview

    The cut in steel production in 2009 was brought about by the dampened demand for steel by the automotive and construction sectors. This will surely result in a corresponding cut in output by steel makers. The cut in supply and demand for steel will either increase or reduce the price.
    This is graphically ...

    Solution Summary

    This is a discussion of the effect of the cancellation of steel on the quantity supplied and demanded for steel. The expert determines if cancellations of orders change the demand for steel, the quantity demanded, the supply of steel or the quantity supplied. A graph is illustrated.

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