Friday, July 08, 2005
DD & SS
Q: Using demand and supply analysis. explain why love's not at your doorstep. [10]
A: Demand is defined as the amount of goods and services that consumers are willing and able to pay at various prices per period of time, ceterus paribus. As applied to this particular question, the supplier would be Miss Cupid.
Due to a recent increase in supply of love movies, love stories or whatever lovey durvey stuff there is out there in the market, there is an increase in consumer's demand for cupid's arrows, shown by a shift in the demand curve from DD to DD1, as illustrated by Diagram 1. However, a shortage of raw materials to make cupid's arrows places a downward pressure on supply, shifting the supply curve from SS to SS1.
As a result, Miss cupid could not meet the increase in demand for cupid's arrows, placing an upward pressure on price, causing price to increase from P to P1. Hence, consumers with lower income [like me!] could not afford the higher price of P1 and were displaced out of the market, resulting in a loss of my entire consumer welfare =(. The quantity exchanged has also decrease from Q to Q1.
In conclusion, the consecutive increase in demand and decrease in supply results in an upward pressure on prices, forcing some consumers to stop consuming the good. Thus, there's no love at my doorstep.
Q: Using demand and supply analysis. explain why love's not at your doorstep. [10]
A: Demand is defined as the amount of goods and services that consumers are willing and able to pay at various prices per period of time, ceterus paribus. As applied to this particular question, the supplier would be Miss Cupid.
Due to a recent increase in supply of love movies, love stories or whatever lovey durvey stuff there is out there in the market, there is an increase in consumer's demand for cupid's arrows, shown by a shift in the demand curve from DD to DD1, as illustrated by Diagram 1. However, a shortage of raw materials to make cupid's arrows places a downward pressure on supply, shifting the supply curve from SS to SS1.
As a result, Miss cupid could not meet the increase in demand for cupid's arrows, placing an upward pressure on price, causing price to increase from P to P1. Hence, consumers with lower income [like me!] could not afford the higher price of P1 and were displaced out of the market, resulting in a loss of my entire consumer welfare =(. The quantity exchanged has also decrease from Q to Q1.
In conclusion, the consecutive increase in demand and decrease in supply results in an upward pressure on prices, forcing some consumers to stop consuming the good. Thus, there's no love at my doorstep.
Clare [8:58 PM]
