Economics question (1 Viewer)

[Rayanaldo]

I need help with this question:

Given that the demand curve is fixed, what effect will each of the following have on the demand for product B?
a.) There is a technological advance in the methods of producing B.
b) There is a decline in the number of firms in the industry that produces B.
c.) There is an increase in the prices of resources required to produce B.
d.) There is an expectation that the equilibrium price of B will be lower in the future than it is currently.
e.) There is a decline in the price of product A, a good whose production requires substantially the same techniques and resources as does the production of B.

Can anyone help? I need to do this by Monday. Any help would be greatly appreciated.

 

[azza_3761]

a) increase in supply as more will be able to be puchased with the same resources and sold at the same price
b)decrease in supply as there are less firms to supply the good
c)decrease in supply as the good costs more to produce
d)either increase of supply as consumers decide to stock up or decrease in supply as there is no use in investing in that good
e)increase in supply as there is not as much competition in the market

 

[Rayanaldo]

Thank you so so much azza. Appreciate it.

 

[Ednaw]

a) increase in supply as more will be able to be puchased with the same resources and sold at the same price
b)decrease in supply as there are less firms to supply the good
c)decrease in supply as the good costs more to produce
d)either increase of supply as consumers decide to stock up or decrease in supply as there is no use in investing in that good
e)increase in supply as there is not as much competition in the market

hey for
d) i kinda dont agree, if the price is expected to drop consumers are more likely to decrease there purchase of the good and wait till the price drops before they stock up. therefore price drops
And conversly in the long term thered be an increased demand for the good and if you dont assume ceteris paribus the price of the good should rise again!! haha (the irony)

Also if the price is going to drop it can be assumed that the business may be undergoing economies of scale which would be attractive for investors and may increase the money invested lol

anyway back to the shadows for me.....

 

[Will Hunting]

Isn't Reyanaldo asking for the effect on "demand" of each of the five scenarios? Since the demand curve is fixed, yes, as azza raised, the supply curve will be the one that changes, however, the question seems to ask for the effects these changes will have on the "demand" for B. Assuming free reign of mkt forces, these should be many.

a) Supply curve shifts to the right. Eqm price falls. Demand rises.
b) Supply curve shifts to the left. Eqm price rises. Demand falls.
c) Supply curve shifts to the left. Eqm price rises. Demand falls.
d) Supply exceeds demand. Therefore, supply will shift to the left (since the demand curve is fixed). Eqm price will rise. Demand falls.
e) A and B are not necessarily in competition. This question relates to the producer, not the consumer. Production should shift to A, since the demand for A is rising relative to B. Supply curve for B will shift to the left. Eqm price for B will rise, and demand will fall.

 

[gibbo67]

b) There is a decline in the number of firms in the industry that produces B.

generally the curve would shift to the left due to decreased competition, however if it's an industry where the costs of production are so high that economies of scale can only be achieved by very large firms in an oligopoly situation to create "workable competition", the curve ought to shift to the right since firms can become more efficient in production, thus reducing costs and increasing market supply.