Question

In four to five sentences, explain some of the factors that cause shifts in supply and demand and what the effects of these shifts are.

Answer 1

In the real world, businesses base all their projections to the law of demand and supply. The law of demand states that as the quantity of demand rises, the price of the product falls, and vice versa. On the other hand, as the quantity of supply rises, the price of the product also rises.

Let's take a situation for example. Company A's demand has decreased because a new product from Company has just been launched. Because of their advertisements in blockbuster movies, the product of Company B was bought by many people. Because of this, Company A decides to decrease their price so that people will opt to buy it. To do this, Company A has to reduce their supply. The qualitative graph is shown in the picture. S1&D1 and D2&D2 are supply and demand before and after Company B launched their product, respectively.

From the graph, we can say that from S1 and D1 to S2 and D2, the price decreases and the quantity of products also decreases.

Answer 2

Answer:

Sample Response:  Shifts in supply and demand occur when the amount of goods available increases or decreases, or when the demand for a particular good increases or decreases. Shifts in supply can happen when consumers change their spending habits, when competitors produce similar goods, or when the availability of labor or resources changes. Shifts in demand occur when the price changes or when the number of people trying to buy the good changes. It can also happen when people's tastes change.