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Explain why supply and demand curves shift and how shifts cause changes in the market price

Date Submitted: 09/09/2006 22:54:19
Category: / Social Sciences / Economics
Length: 7 pages (1951 words)
Views: 70443

{Note: all diagrams were drawn by hand. However, there is nothing complex only very simply supply and demand diagrams with straight lines to indicate supply and demand which you can imagine yourself very easily} <Tab/>Prices are set as a result of the price mechanism. The price for a good is the price at which the quantity of the good demanded is the same as the quantity of good supplied: this …

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…the entry of new firms into an industry. Expectations of economic conditions can vary supply also: if businesses believe that a recession is imminent, they are less likely to invest and thus less is produced, even if a reasonable price is commanded for a certain good. If the price of a good is expected to lower, firms become desperate to sell their stocks before prices do fall raising the quantity supplied at a certain price.

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