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Sample of ECO 365 Week 1 Discussion Question Response
What is the difference between a movement along and shift of the demand curve? Show the impact on the equilibrium price and quantity that results from; (1) an increase in demand, (2) an increase in supply, (3) an increase in both supply and demand. Give an example of the role of supply and demand in decision-making.
A movement along the demand curve occurs when a change in price of a good or service occurs. A shift in the demand curve occurs when any non-price determinant of demand (like change in consumer income, change in tastes and fashions, change in price of the other goods, and so on) changes.
Equilibrium price will decrease and quantity will increase when there will be an increase in demand. Equilibrium price will be unaffected and quantity will increase when there will be an increase in supply. Equilibrium price as well as quantity will increase when there will be an increase in both supply and demand.
An example of the role of supply and demand in decision-making is as follows: If the demand of widgets is high, the supply of widgets is high. If we see that a particular good or service has a high demand, then suppliers will work to fill this demand. If the supply cannot be met, the price of widgets will rise.