Question

Draw a supply curve starting from the origin and going up at a 45-degree angle.

A. Draw an inelastic demand curve and indicate on the graph the equilibrium price and quantity.

B. Draw a shift in supply(shift out) associated with an increase in the supply. Indicate on the graph the new equalibrium price and quantity.

Answer 1

1) Graph A showing the Increasing or positive upward supply curve indicating the higher the price higher the quantity supplied in the market example when the price is 10 quantity supplied 20 and when the price is 30 quantity supplied 60.

2) Graph B showing when falling in the price P1 to P2 the less quantity demanded Q1 to Q2 indicating that demand is inelastic because large fall in the rice resulted in low demand for particular goods.

3) Graph C indicating the increasing the supply due to rising in the price in the market it induces suppliers to sell more goods as a result supply curve will shift to the right side. the initial equilibrium is demand and supply intersecting at the P level of the price and Q level of the output.

The new equilibrium is the P1 price at the Q1 level of output increasing the supply of goods resulted lowering the price.