"A decrease in supply will lead to an increase in the price, which decreases demand, thus lowering price. Thus, a decrease in supply has no effect on the price of a good." Evaluate this statement.
2006-09-17 03:57:38 · 8 answers · asked by Anonymous in Education & Reference ➔ Homework Help
A decrease in supply would only INCREASE the price if there WERE a demand for such a product.
2006-09-17 04:05:06 · answer #1 · answered by For sure 4 · 0⤊ 1⤋
The statement is true in theory, based on the laws of supply and demand. However, in the real world? Not always. There are other factors to consider--for instance, is the product necessary for daily life? If so, a decrease in supply would increase the price, but most people would still find a way to buy it. Demand may decrease slightly, but not so much that it would have an effect on the price of the product. Case in point: Gasoline. Over the past several years, with conflicts in the Middle East, the supply for gas has dropped, and the price increased. It has steadily increased over time, although fluctuating periodically, and people still need gas, so they are willing to pay the extra 2-3 dollars a gallon.
2006-09-17 04:15:54 · answer #2 · answered by killingwish 4 · 0⤊ 0⤋
Your statement is partially true and mine maynot be totally correct either. Depending on Demand a decrease in Supply will or should cause a increase in prices. And an Increase in supply in time should decrease pricing. All depends on how needed or popular the product is...
2006-09-17 04:31:57 · answer #3 · answered by Scott 6 · 0⤊ 0⤋
Simple answer: NO EFFECT!
Expanded Answer: Demand is the key, regardless of all other factors. Supply and demand is more than a nice theory, demand generates and drives the supply market.
2006-09-17 04:07:25 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Well, I guess it's a fair point to make. There are factors other than price that affect supply and demand, though.
2006-09-17 04:00:06 · answer #5 · answered by sirhellkow 2 · 0⤊ 1⤋
the statement is a basic concept with is correct.
If there is a 100 people and 100 pens - 1 cent each
the same 100 people and 10 pens - people will spend more to get the same pen due to higher demand and people willing to spend more.
2006-09-17 04:06:14 · answer #6 · answered by BCOL CCCP 4 · 0⤊ 0⤋
As an example let's use Spinach.As you may know,spinach was linked to E.Coli infection earlier this week.Stores immediately pulled all fresh spinach from their shelves.The price of fresh shinach is now through the roof.
2006-09-17 04:01:50 · answer #7 · answered by hott.dawg™ 6 · 0⤊ 1⤋
When you sell out order more!
2006-09-17 03:59:27 · answer #8 · answered by rookie 3 · 0⤊ 1⤋