Economics-I need help understanding economics....Please help?

Question

Ok so if the cost of something decreases does it affect the supply or the demand and does the curve shift left or right? I need more of a tutor does anyone IM? or e-mail?

Answer 1

Supply and demand are affected by "price" not "cost". If the price of a product decreases, demand usually increases (except in the case of the largely hypothetical Giffen good...another topic). Conversely, when the price of a product decreases, the supply tends to decrease (because there is less incentive for companies to produce the product).

Changes in price don't generally cause the demand curve to shift right or left. Changes in price simply change the quantity along the curve (the shape of the curve depends on elasticity of demand...again, another topic). Shifts in the demand curve are caused by factors OTHER than price. For example, favorable publicity about a product might cause more people to want to buy the product at a given price...this would shift the demand curve to the right. On the flip side, the invention of a new substitute product would cause the demand curve to shift left if fewer people were interested in the old product (the demand for VCRs comes to mind...DVD players shifted the demand curve for VCRs to the left).

Numerous factors can cause the demand curve to shift right (or left)...some examples:
1. News about future price changes. For example, if you heard that the price of paper towels was going to double next year, you might stock up at the current price shifting the demand curve to the right.
2. Price of complementary or substitute products. For example, if the price of jelly doubled, you might buy more honey (the substitute) and/or you might buy less peanut butter (the complement) even if the price of both stayed the same.
3. Income. For example, increases in disposable income tend to increase the demand for air travel even if the airlines hold price constant.
4. Market growth. For example, if you live in a town that doubled in population, demand for local businesses would increase and shift the curve right.
...and many many more!

Answer 2

Your question is pretty vague. By cost do you mean:
-the cost to produce the good (in this case the supply curve would shift right)
-the price of the good (this could be caused by a either supply shifting right or demand shifting left)
-it could also be a trick question, a supply and demand curve shows the different possible prices/costs of producing a certain quantity of a good. in this case, you would be moving along a line and not moving the actual line.

Answer 3

If it becomes cheaper to PRODUCE something then more people can make money building and selling it - the the overall supply available at a given market price will go UP.

If the number of people willing to sell something at a given price gors UP, then the Supply Curve moves RIGHT.

If the number of people who want to BUY something for a given price increases, then the Demand Curve moves RIGHT.

The market price is simply the price at which the two curves intersect.

Hope that helps.

Answer 4

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