In this paper we discuss the function of demand and supply in finding equilibrium monetary value and measure in the market. in a free market the demand and supply determine the equilibrium monetary value and demand. in this instance we consider 2. 500 flats which are to be leased out at a rate of 1. 100 per month. If we assume that this is the equilibrium monetary value and measure in the market we can deduce our demand and supply curve to find the assorted factors that will impact the equilibrium monetary value and measure.
From the above diagram the intersection of the demand curve and supply curve give us the equilibrium measure and the equilibrium monetary value. if the monetary value was to lift so the demand for the flats would worsen. if the monetary value was to worsen so demand would be high for these flats. The accommodation of the free market is automatic because when the supply rises so monetary values lessening. when monetary values decrease so the demand increases coercing the monetary values to lift. therefore in the long tally the free market is at equilibrium. the factors that affect this equilibrium hence include demand. supply. monetary values and charges by other rivals.
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Change in demand: When demand increases there will be an addition in the degree of monetary values. this is caused by the fact that as the demand addition so the demand curve displacements to the right as shown below. when the demand increases so the monetary values addition. when monetary values increase so more apartment builders will be encouraged to increase supply of flats ensuing into increased supply. increased supply will switch the supply curve to the left taking to a diminution in monetary values. hence in the long tally the curves will set into a new equilibrium. this is shown in the diagram below:
When the demand for houses increase so the demand curve displacements from demand curve 1 to demand swerve 2. this increases the monetary values. as the monetary value addition investors are encouraged to put more and supply more flats. this consequences into increasing supply. when supply additions due to the increased monetary values the supply curve displacements downwards from supply curve 1 to provide swerve 2. the new equilibrium now is where demand curve 2 intersects with supply curve two.
Our new equilibrium is at a lower monetary value yet a higher measure. This clearly shows how the market shifts as a consequence of alteration in the demand for flats. Changes in supply and demand: Changes in the supply is caused by the monetary value. when the monetary value rise so the supply degree additions. when the monetary value diminutions so the supply degree diminutions. On the other manus the demand is besides affected by monetary values. when monetary values decline so the higher the demand and when the monetary value rise so the lower is the demand.
Shifts in the demand and supply curve will impact determination devising. this is because as economic experts we will take at bring forthing at the most optimum place. the optimum point will be determined by the maount of gross derived from the flats. the higher the monetary value the higher the gross per aprtmetn yet the lower the gross the lower the gross per flat. nevertheless entire revene will be calculated by multiplying the demand with monetary value. Four points emphasized: When demand increases monetary values will lift. When the monetary values rise so the higher the supply. The higher the supply the lower the monetary value and The lower the monetary value the higher the demand
Application: This construct of demand and supply can be used to find the consequence of an addition in the monetary value of merchandise or even a decrease in the monetary value. nevertheless our above analysis is that of a normal good. therefore in the workplace we can find what wll happen to the demand and gross after an addition or diminution in monetary values. Elasticity of demand: Price snap of demand is the reactivity of demand to a alteration in monetary values. the hgher the monetary value snap so the hgiehr the demand wil respoind to a alteration in monetary values. nevertheless the lower the monetary value snap so the lower is the reactivity to a alteration in monetary value.
Consequences: From the above treatment we have summarized the jurisprudence odf demand and supply for a normal good. it is apparent that for a normal good when demand increases monetary values will lift. when the monetary values rise so the higher the supply. the higher the supply the lower the monetary value and eventually the lower the monetary value the higher the demand.
Mentions:
Brian Snow ( 1997 ) Macroeconomics: Introduction to Macroeconomics. Rout shelf publishing houses. London Philip Hardwick ( 2004 ) Introduction to Modern Economics. Pearson Press. New York Stratton ( 1999 ) Economicss: A New Introduction. McGraw Hill Publishers. New York
