Supply And Demand Essay

1. A firm's current profits are $1,000,000. These profits are expected to grow indefinitely at a constant annual rate of 3.5 percent. If the firm's opportunity cost of funds is 5.5 percent, determine the value of the firm:

Sports teams are switching to a variable-pricing strategy for tickets so that they can get a higher profit on games with record attendance numbers. They feel the need to do so because the marginal costs, such as construction payment and players’ salaries, did not equal to the marginal revenue, since attendance was severely dropping. To pay for the marginal cost, the sports team needed to capitalize on things that they were sure of, like increasing attendances to games between major sporting rivals.

Recent medical advances have greatly enhanced the ability to successfully transplant organs and tissue. Forty-five years ago the first successful kidney transplant was performed in the United States, followed twenty years later by the first heart transplant. Statistics from the United Network for Organ Sharing (ONOS) indicate that in 1998 a total of 20,961 transplants were performed in the United States. Although the number of transplants has risen sharply in recent years, the demand for organs far outweighs the supply. To date, more than 65,000 people are on the national organ transplant waiting list and about 4,000 of them will die this year- about 11 every day- while waiting for a chance to extend their life through organ donation

| An oligopolist that faces a kinked demand curve is charging price P = 6. Demand for an increase in price is Q = 280  40P and demand for a decrease in price is Q = 100  10P. Over what range of marginal cost would the optimal price remain unchanged?Answer

When there is a change of one of the factors of supply- like changes in the prices of production inputs like labour or capital; a change in production technology and its associated productivity change; or the amount of competition in a specific product market- there is a corresponding change in the supply curve. For example, if worker productivity improves due to some human capital or technology investment, then the costs of production decrease. This exerts a positive effect on the supply curve shifting it right, where the new market equilibrium is at a higher quantity and a lower price, holding everything else constant. There can also be a negative shift that moves the supply curve to the left, with the resulting market clearing price being higher and quantity lower, ceteris

Consider the Law of Supply on p. 36 of the textbook. What affect do lower prices

When more or some items are supplied than demanded, competition among sellers trying to get rid of the excess will force the price down, discouraging future production. The resources used for that item being set free for use in producing some else that is in greater demand. Conversely, when the demand for a particular item exceeds the existing supply, rising prices due to competition among consumers encourages more production, drawing resources away from other parts of the economy to accomplish that.

A basic principle of economic theory and a vital element in every economy is supply & demand. The law of demand states that, everything being equal, the greater the price of a good/service, the lesser the quantity of that good is demanded. On the other hand, the law of supply states that the greater the price of a good/service, the greater that good is supplied at (Jackson et al 2007).

The relationship between the price of a product and the quantity supplied, holding all other things constant is generally sloping upwards. Supply is represented by the entire curve and not just one point on the curve. When the price of the product changes, the quantity supplied changes, but supply does not change. When cost of production changes, supply will change, and the entire supply curve will shift. Market Supply is the summation of all the individual supply curves. In general, the more firms producing a product, the greater the market supply. When quantity supplied at a given price decreases, this is generally caused by an increase in the cost of production or decrease in the number of sellers. An increase in wages, cost of raw materials, cost of capital, can also decrease supply. Weather may also affect supply, if the raw materials are perishable or unattainable due to transportation problems.

The consumer¡¦s expectation about the oil price is decreased, thus the demand for the oil will be reduced, and it shifts the demand curve to left. The price of the oil will be reduced also.

A change in anything that affects supply besides price causes a shift on the supply curve. Factors that affect the supply curve are; price of inputs, technology, expectations, and taxes and subsidies. If a producer finds that the cost for producing specific items is getting higher than supply of that item will begin to decrease as it is not economically sound to continue to make a large amount of these items. Technology has a direct affect on supply, as it becomes easier and less expensive to produce an item more of that item is produced. As with the demand curve expectation also has an affect on the supply curve, if consumers expect the cost of a product to increase they will buy more of that items which causes a decrease of supply. An example of this would be when the price of gas is expected to raise people will fill their car up and also fill gas containers. Tax also has an effect on the supply curve as it does on the demand curve, as taxes increase on a specific items then the supply for that particular items increase as people stop purchasing the item.

The quantity demanded of a good or service is defined as the amount that consumers want to buy over a certain time period, and at a particular price. This theory is based on the law of demand which states assuming all other things stay the same, when the price of a good rises this causes the quantity demanded of the good to decrease; and when the price of a good falls, the quantity demanded of the good will increase. The quantity supplied of a good or service is the amount that producers look to sell over a time period at a certain price. The law of supply states, assuming everything else remains unchanged the higher the price of a good, the higher the quantity supplied and the lower the price of a good, the less the quantity supplied. This diagram here shows how the demand and supply framework influence price.

With a decrement in supply, the supply curve shifts inwards along the demand curve, causing a new equilibrium price as well as equilibrium quantity to be achieved. In this case, the equilibrium price will increase, whereas the equilibrium quantity will decline (Gillespie 2007, p.72-99).The diagrams below illustrate causes of increase in equilibrium price:

The aggregate demand and the aggregate supply model is a macroeconomics model that explains price level and real output through the relationship of aggregate demand and supply. The aggregate demand curve consist of consumption(C), investment (I), government spending (G), net export (NX). The question caused by monetary expansion. In this essay, it analysis monetary policy, Philips curve which relation between inflation and unemployment.it draws conclusion and apply the theory into two countries which are England and France.

Supply curve shows the relationship between the quantity supplied of a good or service and its price. The law of supply states that while other determinants remain the same (cetris peribus), the price for services or goods increase, quantity supplied for the services and goods will increase, conversely, the price for services and goods decrease, quantity supplied for the