Economics

Assignment on Asfandyar wali khan

Prepared and submitted by:

Amjad Ali Afridi M.sc Finance 1st semester

Submitted to: Mr. shahzad hanif

Institute of Management Sciences

management education with public spirit and market dynamism

Q1. What are the factors that affect the Demand?

In economics the fundamental law for supply and demand is the foundation of market economy. Demand refers to the amount of a good or services that consumer want. Supply refers to the amount of the product that the market is capable of producing. There are the following factors that has affect on the Demand are as follows Price of product Consumer Income The price of related goodssubstitutes and complements The number of consumers Consumer preferencestastes and advertising Consumer expectations about future prices

Q2. These factors will shift which curve to which side?

Price of product If the price increase this will result no shift it will move along. You don't draw a new curve to the right, but you go DOWN the current curve (extension of demand). This is because when the price of that good only changes, you don't shift, but move along the curve

Consumer Income
A consumer is able to purchase a normal good and has a demand curve, D1, which provides the relationship between price and quantity given his preferences, income and other consumption attributes. Assuming an increase in his income, ceteris paribus, his demand curve would shift outward to D2, corresponding to a higher quantity for each purchase price. The consumer would then move his consumption for the good from Q1 to Q2, increasing his purchase of the good.

. The price of related goodssubstitutes and complements

An example of this would be the demand for hotdogs and hotdog buns. The supply and demand of hotdogs is represented by the figure at the right with the initial demand D1. Suppose that the initial price of hotdogs is represented by P1 with a quantity demanded of Q1. If the price of hotdog buns were to decrease by some amount, this would result in a higher quantity of hotdogs demanded. This higher quantity demanded would cause the demand curve to shift outward to a new position D2. Assuming a constant supply S of hotdogs, the new quantity demanded will be at D2 with a new price P2.

 The number of consumers If there are more people, then obviously there would be more demand for that product. If the number of children drastically rose over the next 5 years, then obviously the demand for nappies, baby clothes, toys etc. which will shift the demand curve the rightward.

Consumer preferencestastes and advertising A bit like fashion if something is in high fashion (e.g. if all of a sudden, it becomes in fashion to wear leather boots) then obviously people will buy it. If Hush Puppies becomes more tastier, then demand will increase, i.e. shift right

Consumer expectations about future prices I. An increase in the expected future price of a good increases current demand. II. A decrease in the expected future price of a good decreases current demand. III. For example, when a good is temporarily put on sale, people stock up on the good.

Q3 use demand and supply curve to find out change to price and Quantity? The Ceteris Paribus Assumption
To obtain various points on the individual demand curve for pizzas we assume that only the price of pizzas changes, while other determinants of the demand for pizzas (income, tastes and preferences, the price of related goods, etc.) remain constant, or ceteris paribus. The negative slope of the individual demand curve reflects the law of demand. Law of Demand: The higher the price, the smaller the quantity demanded, ceteris paribus.

 A change in quantity demanded is caused by a change in the price of the good, which

causes a movement along the demand curve. Law of Supply: The higher the price, the larger the quantity supplied, ceteris paribus.

References

https://www.boundless.com/economics/introducing-supply-anddemand/

Q4. What are the factors that affect the Supply? The main determinants of supply include: The price of the product The cost of inputs The state of production technology The number of producers Producer expectations about future prices Taxes or subsidies from the government Q5. These factors will shift which curve to which side? The price of the product
A change in the price of a good or service, holding all else constant, will result in a movement along the supply curve. such as price of substitutes, the supplier will adjust the quantity supplied to the level that is consistent with its willingness to accept the prevailing price. The change in price will result in a movement along the supply curve, called a change in quantity supplied, but not a shift in the supply curve. Changes in supply are due to non-price changes

 The cost of inputs

A change in the cost of an input will impact the cost of producing a good and will result in a shift in supply; supply will shift outward if costs decrease and will shift inward if they increase. If production costs increase, the supplier will face increasing costs for each quantity level. Holding all else the same, the supply curve would shift inward (to the left), reflecting the increased cost of production. The supplier will supply less at each quantity level. If production costs declined, the opposite would be true. Lower costs would result in an increase in output, shifting the supply curve outward (to the right) and the supplier will be willing sell a larger quantity at each price level. The supply curve will shift in relation to technological improvements and expectations of market behavior in very much the same way described for production costs.

 The state of production technology

Technological improvements that result in an increase in production for a set amount of inputs would result in an outward shift in supply. Supply will shift outward in response to indications of heightened consumer enthusiasm or preference and will respond by shifting inward if there is an assessment of a negative impact to production costs or demand

The number of producers

If more firms start producing widgets, the market supply of widgets will rise shifting the supply curve to the right.

Producer expectations about future prices

If widget prices are expected to increase in the near future, I might store much of my current production of widgets to take advantage of the higher future price cutting back the supply for the short term. Other producers would react in a similar way. So, an expectation that prices will rise in the future causes supply to decrease today causing the supply curve to shift left.

 Taxes or subsidies from the government

Government policies, such as taxes, subsidies, and regulations, all affect the cost of producing goods and services, which affects profits and-as a result-my production decisions. For example, imagine the government taxed every new widget that producers made; the result would be smaller profits. Smaller profits would cause me to decide to reduce the quantity of widgets I produce. Other widget producers would likely do the same. This would shift the widget supply curve to the left.