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Economics
The following graph represents the supply and demand curves for the product in question:
What this means is that as the price increases, more of the good will be supplied and less of the good will be demanded. The price sensitivity of consumers will be reflected by the slope of the Qd line. The price sensitivity of the producers will be reflected by the Qs line.
The supply curve has an upward slope because producers will produce more as the price increases, because the higher price allows more producers to be profitable. The demand curve is downward sloping because consumers buy less of the good as the price increases. This is because the higher the price, the fewer consumers will get postiive utility from the product and be willing to pay the price.
For Good A, the equilibrium point is the price point where the demand and supply are equal. In this siuation, that is at price point $50. At this price, there is demand for 16 units, and there is supply of 16 units. There is no excess demand nor is there any excess supply. At P=30, demand for the good is 24 and supply is 10. Therefore, there is a shortage of 14 units (24-10), as there is far more demand in the market than there is supply in the market.
At P=60, demand is 12 and supply is 19. Thus, there is a surplus in the market of (19-12) 7 units. The producers are producing 7 more units at this price than consuemrs are willing to purchase.
2. The demand and supply curves for rental housing in Avalon are as follows:
The equilibrium point is at $350, where demand is 120 and supply is also 120.
b. If the population of Avalon increases, demand increases by 50 units at each price level, the new demand and supply curves are as follows:
The new equilibrium point is at $400, where demand and supply are both at 140.
c. In this case, there has been a shift upwards in the supply curve. The supply is higher because the demand has pushed the price up. So the demand curve has shifted to the right, which moves the equilibrium point up the supply curve.
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