Determination of price policy: While fixing the price of this product, a businessman has to consider the elasticity of demand for the product. He should consider whether a lowering of price will stimulate demand for his product, and if so to what extent and whether his profits will also increase a result thereof.
Graphical representations[ edit ] Although it is normal to regard the quantity demanded and the quantity supplied as functions of the price of the goods, the standard graphical representation, usually attributed to Alfred Marshallhas price on the vertical axis and quantity on the horizontal axis.
Since determinants of supply and demand other than the price of the goods in question are not explicitly represented in the supply-demand diagram, changes in the values of these variables are represented by moving the supply and demand curves often described as "shifts" in the curves.
By contrast, responses to changes in the price of the good are represented as movements along unchanged supply and demand curves. Supply schedule[ edit ] A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied.
Under the assumption of perfect competitionsupply is determined by marginal cost. That is, firms will produce additional output while the cost of producing an extra unit of output is less than the price they would receive.
A hike in the cost of raw goods would decrease supply, shifting costs up, while a discount would increase supply, shifting costs down and hurting producers as producer surplus decreases.
By its very nature, conceptualizing a supply curve requires the firm to be a perfect competitor i. This is true because each point on the supply curve is the answer to the question "If this firm is faced with this potential price, how much output will it be able to and willing to sell?
Economists distinguish between the supply curve of an individual firm and between the market supply curve. The market supply curve is obtained by summing the quantities supplied by all suppliers at each potential price. Thus, in the graph of the supply curve, individual firms' supply curves are added horizontally to obtain the market supply curve.
Economists also distinguish the short-run market supply curve from the long-run market supply curve.
In this context, two things are assumed constant by definition of the short run: In the long run, firms have a chance to adjust their holdings of physical capital, enabling them to better adjust their quantity supplied at any given price. Furthermore, in the long run potential competitors can enter or exit the industry in response to market conditions.
For both of these reasons, long-run market supply curves are generally flatter than their short-run counterparts. The determinants of supply are: Production costs are the cost of the inputs; primarily labor, capital, energy and materials. Productivity Firms' expectations about future prices Number of suppliers Demand schedule[ edit ] A demand schedule, depicted graphically as the demand curverepresents the amount of some goods that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, tastes and preferences, the price of substitute goodsand the price of complementary goodsremain the same.
Following the law of demandthe demand curve is almost always represented as downward-sloping, meaning that as price decreases, consumers will buy more of the good.
The demand schedule is defined as the willingness and ability of a consumer to purchase a given product in a given frame of time.5. Central bank is the apex body of the monetary and banking system of the nation’s economy.
Task 1 The demand for newspaper is inelastic while the supply for newspaper is elastic in the short run.
This means the quantity demanded for newspaper does not respond strongly to price changes but the quantity supplied for newspaper is responsive to price changes in the short run.
If the demand is inelastic the larger part of the indirect tax can be shifted upon buyers by increasing price. On the other hand if the demand is elastic than the burden of tax will be more on the producer.
The percentage change in prices is always higher than per cent change in demand for inelastic demand as shown by the slanting of the curve in Figure 1.
Higher per cent change in demand as compared to prices depicts elastic demand which the above statement reflects.
The demand for newspaper is inelastic while the supply for newspaper is elastic in the short run. This means the quantity demanded for newspaper does not respond strongly to price changes but the quantity supplied for newspaper is responsive to price changes in the short run.
is as usual the place to go to get quantitative analysis of the primaries. They project Trump as getting 85 of the 91 delegates in New York, and still coming up about eighty delegates short of locking in a victory before the convention.