Question

Answer all FIVE questions

1. Discuss why you think managers should be familiar wit the concept of equilibrium price and quantity.

2. Explain the concept of equilibrium price and quantity and how it is attained

3. Explain why a change in consumers’ tastes results in an upward or downward shift in the original demand curve whereas a change in price results in a movement along the demand curve.

4. Assuming that the supply of wheat is less than its demand, how would that impact the market price. If there is a shortage of wheat, how can the government intervene to control an increase in the price.

5. What would be a substitute product for your I-phone and how would an increase in that substitute product impact the demand for I-phone?

Answer 1

1) Yes managers should be familiar with the concept of equillibrium price and quantity because only at that point the quantity supplied will be equal to the quantity demanded by people. Equillibrium price can also be considered as market price in few cases because in that case both consumer and supplier are willing to pay and supply good. A manager is someone who is the part of supplier group, so if they don't know about how much consumer is willing to pay than they can't know how much quantity they should supply.

2) The point where quantity demanded and quantity supplied are equal than that point is called equllibrium quantity and the price at which the equillibrium is attained is called as equllibrium price.

4) When the supply of wheat is less than the quantity demanded than there is a shortage of product in the market which makes the price of wheat to go up. Less supply with more demand always makes the price of product to go up. In order to avoid these than government will keep price ceiling on wheat so that there will be no increase in price of wheat.

Price ceiling is the legal maximum price that a product can be sold where beyond that price they can't sold the product.