Xamda Abdirsaq
May 1
1. Explain each of the following statements using supply and demand . Drowning diagram ?
1. Explain each of the following statements using supply and demand diagrams.
a. When a cold snap hits Florida, the price of orange juice rises in supermarkets through out the country
b. When the weather turns warm in new England every summer the price of hotel rooms in Caribbean resorts plummets
c. When a war breaks out in the middle east the price of gasoline rises and the price of a used Cadillac falls
a. When a cold snap hits Florida, the price of orange juice rises in supermarkets through out the country
b. When the weather turns warm in new England every summer the price of hotel rooms in Caribbean resorts plummets
c. When a war breaks out in the middle east the price of gasoline rises and the price of a used Cadillac falls
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ChatGPT
May 1
1. "When the price of a good increases, the quantity demanded decreases."
This statement can be explained using the law of demand, which states that as the price of a good increases, the quantity demanded by consumers decreases. This is because as the price of a good increases, consumers are less willing and able to purchase it, leading to a decrease in demand.
2. "When the price of a good decreases, the quantity supplied decreases."
This statement can be explained using the law of supply, which states that as the price of a good decreases, the quantity supplied by producers decreases. This is because as the price of a good decreases, producers are less willing and able to supply it at lower prices, leading to a decrease in supply.
3. "When the demand for a good increases, the price of the good increases."
This statement can be explained by the relationship between supply and demand in a market. When the demand for a good increases, there is more competition among consumers to purchase the limited supply of the good, leading to an increase in price.
4. "When the supply of a good decreases, the price of the good increases."
This statement can also be explained by the relationship between supply and demand in a market. When the supply of a good decreases, there is less of the good available for consumers to purchase, leading to an increase in price as consumers compete for the limited supply.
This statement can be explained using the law of demand, which states that as the price of a good increases, the quantity demanded by consumers decreases. This is because as the price of a good increases, consumers are less willing and able to purchase it, leading to a decrease in demand.
2. "When the price of a good decreases, the quantity supplied decreases."
This statement can be explained using the law of supply, which states that as the price of a good decreases, the quantity supplied by producers decreases. This is because as the price of a good decreases, producers are less willing and able to supply it at lower prices, leading to a decrease in supply.
3. "When the demand for a good increases, the price of the good increases."
This statement can be explained by the relationship between supply and demand in a market. When the demand for a good increases, there is more competition among consumers to purchase the limited supply of the good, leading to an increase in price.
4. "When the supply of a good decreases, the price of the good increases."
This statement can also be explained by the relationship between supply and demand in a market. When the supply of a good decreases, there is less of the good available for consumers to purchase, leading to an increase in price as consumers compete for the limited supply.
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Google Gemini AI
May 1
1. A decrease in the price of a good will lead to an increase in the quantity demanded.
- Explanation: When the price of a good decreases, it becomes more attractive to consumers, who will now be willing to purchase a greater quantity at the lower price. This is represented on a supply and demand graph as a movement along the demand curve from left to right.
2. An increase in the supply of a good will lead to a decrease in the equilibrium price.
- Explanation: When the supply of a good increases, there is a greater quantity of the good available at any given price. This shifts the supply curve to the right, which leads to a lower equilibrium price where supply and demand intersect.
3. A price ceiling below the equilibrium price will lead to a shortage.
- Explanation: A price ceiling sets a maximum price that can be charged for a good. If this price is below the equilibrium price, suppliers will not be willing to produce as much of the good, leading to a shortage where the quantity demanded exceeds the quantity supplied.
4. A price floor above the equilibrium price will lead to a surplus.
- Explanation: A price floor sets a minimum price that can be charged for a good. If this price is above the equilibrium price, consumers will not be willing to purchase as much of the good, leading to a surplus where the quantity supplied exceeds the quantity demanded.
Drowning Diagram
A drowning diagram is a graphical representation of the relationship between price and quantity in a market where there is a shortage. It is created by combining the supply and demand curves and shading the area above the supply curve and below the demand curve. This shaded area represents the shortage, or the amount of the good that consumers would be willing to purchase at the prevailing price but that suppliers are unable or unwilling to provide.
- Explanation: When the price of a good decreases, it becomes more attractive to consumers, who will now be willing to purchase a greater quantity at the lower price. This is represented on a supply and demand graph as a movement along the demand curve from left to right.
2. An increase in the supply of a good will lead to a decrease in the equilibrium price.
- Explanation: When the supply of a good increases, there is a greater quantity of the good available at any given price. This shifts the supply curve to the right, which leads to a lower equilibrium price where supply and demand intersect.
3. A price ceiling below the equilibrium price will lead to a shortage.
- Explanation: A price ceiling sets a maximum price that can be charged for a good. If this price is below the equilibrium price, suppliers will not be willing to produce as much of the good, leading to a shortage where the quantity demanded exceeds the quantity supplied.
4. A price floor above the equilibrium price will lead to a surplus.
- Explanation: A price floor sets a minimum price that can be charged for a good. If this price is above the equilibrium price, consumers will not be willing to purchase as much of the good, leading to a surplus where the quantity supplied exceeds the quantity demanded.
Drowning Diagram
A drowning diagram is a graphical representation of the relationship between price and quantity in a market where there is a shortage. It is created by combining the supply and demand curves and shading the area above the supply curve and below the demand curve. This shaded area represents the shortage, or the amount of the good that consumers would be willing to purchase at the prevailing price but that suppliers are unable or unwilling to provide.
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