Supply and Demand
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Visit http://www.bized.co.uk/learn/economics/markets/mechanism/interactive/part1.htm and read the material posted about supply and demand. Explore the concepts of supply and demand by using the interactive features on the graphs. Use the questions following the diagrams to guide your exploration. Visit parts 1, 2, & 3 of the Web site.
Fill in the matrix and answer the questions in Appendix C (attached). Describe how changes in price and/or quantity of various goods and services will affect either supply or demand and the equilibrium price. Use the graphs from the interactive activity as a tool to help you visualize the changes in price and quantity.
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This solution gives you a detailed discussion on Supply and Demand.
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Answer the following questions.
1. If the price of a good increases, what happens to demand?
This question can be answered from the law of demand which says that if all other factors are kept constant, if the price of the goods increases less quantity of goods will be demand. The price and the quantity of good demanded are inversely related.
2. If the price of a good decreases, what happens to supply?
This can be answered from the law of supply. This says that the price of a good and the quantity supplied are directly related. In other words, when the prices of a good decrease, lower quantity of that good will be supplied. So when the price of a good decrease, the supply decreases.
3. Does a change in price create curve shifts? Explain.
A change in price ...
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