Question

List and discuss the factors that shift demand. Illustrate graphically.

5.         Define "supply" and the Law of Supply. Why does the supply curve have a positive slope? Discuss these reasons with respect to why a supply curve for olives has a positive slope.

6.         Define, derive and illustrate graphically a market supply curve for olives with only three countries (Spain, Italy and Greece) supplying olives to the market.

Answer 1

Ans) 5) Supply is the total amount of particular goods or services available to the consumers in a market.

Law of supply states that there is a positive relationship between price and quantity supplied. That is, as price increases, quantity supplied increases and vice versa.

There is a positive slope for olives because at higher prices, sellers are willing to increase the quantity supplied in order to increase their revenue.

6) Market supply is the sum of all the individual supply in the market.

7) Demand shifters÷

• Change in number of buyers. An increase in number of buyers will increase the demand. And decrease in number of buyers will decrease the demand.
• Change in income of consumers. An increase in consumer income will increase the demand and vice versa.
• Change in consumer preference. Increase in popularity of product will increase the demand and vice versa.
• Change price of related goods. Increase in price of substitute will increase the demand. An increase in price of complementary good will decrease the demand.

An increase in demand will shift the demand curve to the right while a decrease in demand will shift demand curve to the left.