supply and demand curves Flashcards
what would happen on a supply and demand graph if the cost of production increased.
supply would decrease and on a graph would shift to the left. Moreover the allocative equilibrium would change and there would be a new point of price and for quantity i.e. p2 and q2
what happens to demand when supply decreases?
Nothing, supply nor demand affect each other.
If the business is in excess demand what might the business do?
Increase prices so that they could maximize profit whilst getting back to equilibrium as if they would increase prices demand would then fall again due to some who would be able and willing to pay for the good but most would just not bother.
What would a business do if they had an excess supply
They would decrease prices so they could get some money otherwise they might as well of be throwing money away. A decrease in price will attract more customers which would increase demand.
if taxes increased and subsides decreased what affect would it have on a bus companies supply and demand curves?
It would decrease supply and would also decrease demand as people would have less RDI to spend on a bus, also the bus companies get some revenue from the government via subsides so they would run less busses as it would be better off for them.
