Running head: CHANGES IN SUPPLY AND DEMAND 1

Changes in Supply and Demand

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Question 1

Change in demand while the supply remains constant will ensure that there is a change in

quantity and the price of the product. To be specific, increased demand for the product, while

there is no change in the supply, implies that more consumers will be willing to purchase the

product which will lead to its scarcity in the market. Consequently, the equilibrium price of the

product will be affected by the scarcity which will then lead to an increased price for the product.

On the other hand, a decreased demand of the product with the unchanged supply denotes that

fewer consumers will be willing to purchase the product and this will augment its quantity in the

market (Knittel & Pindyck, 2016). Subsequently, this will prompt a fall in the product price to

promote its purchase. Nevertheless, the product quantity in the market will remain high.

Secondly, changes in the product supply at a relentless demand denotes changes in the

product price along with its quantity in the market. In particular, an increased supply of the

product in the market suggests that its quantity will increase hence, prompting a reduction in

price following the reduced demand for purchasing the product.

Question 2

Demand and supply analysis is highly recognized as the study of how buyers and sellers

interact as the means to determine transaction prices as well as quantities. It is essential to note

that the price of gasoline and stock is not and cannot be determined by buyers alone. This is

primarily because the price is a function of both supply and demand. For instance, at the start of

the year, the general price of the stock went up because more people wanted to buy a stock than

selling it. When it comes to the basics of economics, supply, and demand highly determine the

price of a good in a free market (Beattie, Taylor, & Watts, 1985). This is to say that there are
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only two options that can be considered in bringing down the price of gasoline or stock. One can

either increase total supply or decrease total demand. Therefore, boycotting a large gas company

does not help in any way when it comes to the price of the gasoline. The price will find

equilibrium through what is known as demand and supply adjustments at the wholesale level.

Question 3

It is proper to note that demand is the amount of commodity a consumer is willing as well

as able to buy at each price. Because demand is greatly based on what is referred to as tastes and

preferences, demand curve shifts. Every time the demand curve shifts end up changing the

amount purchased at every price point. Various factors cause consumer demand to shift. Income,

for instance, can cause the demand curve to shift. When people have a higher income, the

demand curve shifts to the right because people can afford to buy more. The people’s

expectations also play a significant role when it comes o how the demand curve behaves. If the

customers expect prices to shoot in the future, this makes the current demand to increase hence

shifting the demand curve to the right. Prices of related goods is yet another factor that makes the

demand curve to shift (Working, 1925). For example, substitute goods cause the demand curve

to shift if the prices of these related items change. This is to say if the price of other related

goods drops, the demand for the good that has been on use drops hence interfering with the

demand curve.
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References

Beattie, B. R., Taylor, C. R., & Watts, M. J. (1985). The economics of production (No. 338.5

B369). New York: Wiley.

Knittel, C. R., & Pindyck, R. S. (2016). The simple economics of commodity price speculation.

American Economic Journal: Macroeconomics, 8(2), 85-110.

http://doi.org/10.1257/mac.20140033

Working, H. (1925). The statistical determination of demand curves. The Quarterly Journal of

Economics, 39(4), 503-543.