2007-02-13 09:44:15 · 8 answers · asked by tennisman 1 in Social Science ➔ Economics
When price decreases, quantity demanded increases, the demand curve does not move. Instead there will be a movement along the demand curve to a point much lower, and hence the orginal supply curve will now cut the demand curve at this new lower point.
(the supply curve will shift to the right, under the assumption of a downward sloping curve)
It does not depend on the elasticity of the demand curve, the equilibrium point will still shift downwards along the demand curve.
2007-02-13 10:05:37 · answer #1 · answered by xeyaj 2 · 0⤊ 1⤋
When the price goes down, the demand for the good increases. As a result of the increase in demand, the firms or companies produce more of that good. More of that good reduces the demand for the good, and consequently, the supply and demand, as well as the price come back to an equilibrium point.
2007-02-15 17:42:18 · answer #2 · answered by Anonymous · 0⤊ 0⤋
A fall in the price can indicate either a decrease in the demand for the product, or a increase in the supply. You have to look at the quantity to figure it out.
Even then, it's not so easy, because various supply and demand factors are always at work. For example, weather -- good or bad -- is always playing havoc with demand and supply, making them difficult to distinguish!
2007-02-13 18:14:36 · answer #3 · answered by Allan 6 · 0⤊ 0⤋
The answer depends on various factors of which the most important ones are whether we are in perfect competition and on th elasticity of the demand. Assuming perfect competition and a non zero, non infinite elasticity, and assumig we start in equilibrium, supply will initially be reduced since the marginal cost remains the same, and demand will increase. To correct for the difference in supply and demand, the price will eventually go back up to price= marginal cost.
2007-02-14 06:53:16 · answer #4 · answered by danteslives 2 · 0⤊ 0⤋
Supply and demand response to lowered prices depends on product elasticity.
2007-02-13 18:05:48 · answer #5 · answered by Anonymous · 0⤊ 1⤋
Either the supply curve or the demand curve or both of them decreased, i.e., the curves would have the same quantities at a lower price.
2007-02-13 17:56:30 · answer #6 · answered by bluepoland1914 1 · 0⤊ 1⤋
I had a boring unit on thiis. demand increases, supply decreases. People start buying it becasue of a more cheaper price.
2007-02-13 17:47:16 · answer #7 · answered by Cutie 4 · 0⤊ 1⤋
apparently the supply has increased
2007-02-13 17:48:22 · answer #8 · answered by ©2009 7 · 0⤊ 0⤋