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Supply and demand curves

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1. Demand-Supply Curve.
The first thing you need here is to decide on the points that need to be plotted. In case of supply use the first table. Each row of the table gives you the coordinates on the graph that you need to plot. Plot price on the vertical axis and quantity on the horizontal axis. The points that we need to plot are: (800,25), (700,20), (600,15), (500,10), and (400,5). This will give rise to an upward sloping curve. See graph 1.

Then we do the same thing for US demand. The points in that case are: (200,25), (400,20), (600,15), (800,10), and (1000,5). This will give rise to a downward sloping demand curve. See graph 1.

The place where the two curves intersect is the equilibrium. You can either do it graphically, or as in this case make a visual inspection and see that the point (600,15) lies on both the demand and supply curves, and hence that is the equilibrium. The equilibrium price is $15, and the equilibrium quantity is 600 pounds.

In case we add the French demand we need to do what is called horizontal summation. What we do here is leave price untouched and add the French quantity to the American quantity at each price point.Thus at $25 the US demands 200 pounds while the French demand 100 pounds, giving a world demand of 300 pounds (200+100). At $20 the US demands 400 pounds while the French demand 300 pounds to give a total demand of 700 pounds. Do the same for all prices to get the following points: (300,25), (700, 20), (1100, 15), (1500, 10), and (1900, 5).

The place where this curve intersects the supply ...

Solution Summary

Supply and demand curves are explored.