The Student Room Group
Competition - post a photo you've taken of nature >>
Competition - post a photo you've taken of nature >>
Competition - post a photo you've taken of nature >>

Supply curve is so difficult!!!!!!!!!!!!!!!

ECON PLUS DAL SAID: Let’s say you have a firm that can produce two different types of goods “vans” or “cars. At the moment it’s specialising in car production but price of vans goes up massively (maybe due to demand of vans increasing). If this firm can substitute it’s FOP towards van manufacturing then it can respond quickly to the rising demand.

HOWEVER!! if I represent this on a demand and supply curve it doesn't match!
(edited 7 years ago)
ATT00001.txt0.0KB

Scroll to see replies

Reply 1
Avatar for Jane122
Jane122
OP
2
according to the law of demand you can't have a rise in demand without reducing the quantity wtf!!!!!

@MouseyBrown @azizadil1998 @kas9 @zainyyyyy
Reply 2
Avatar for Jane122
Jane122
OP
2
IMG_2826.jpg
To illustrate this on a demand and supply diagram you can show a shift in demand for vans (demand for vans increasing) to the right leading to a new equilibrium with a higher price and quantity. The supply curve does not shift, we simply move along the supply curve. The supply curve is relatively elastic if FoPs can be transferred quickly into the production of vans.
Hope that helps
Original post by Jane122
according to the law of demand you can't have a rise in demand without reducing the quantity wtf!!!!!

@MouseyBrown @azizadil1998 @kas9 @zainyyyyy


Obviously there are going to be exceptions to the models you learn at AS, as you'll even see in unit 3.

But can you really think of anything where demand wouldn't decrease if you put the price up? I mean, people say stuff like 'rich people would buy more supercars because the cars would become more exclusive', but would overall demand actually go up? I don't reckon. So that model is pretty reliable.
Reply 5
Avatar for Jane122
Jane122
OP
2
Original post by mapotts53
To illustrate this on a demand and supply diagram you can show a shift in demand for vans (demand for vans increasing) to the right leading to a new equilibrium with a higher price and quantity. The supply curve does not shift, we simply move along the supply curve. The supply curve is relatively elastic if FoPs can be transferred quickly into the production of vans.
Hope that helps


Why don't supply move? I don't understand what you're talking about! You can't shift the demand curve and increase the price at the same time! That goes against cetruis paribus
(edited 7 years ago)
Reply 6
Avatar for Jane122
Jane122
OP
2
Original post by MouseyBrown
Obviously there are going to be exceptions to the models you learn at AS, as you'll even see in unit 3.

But can you really think of anything where demand wouldn't decrease if you put the price up? I mean, people say stuff like 'rich people would buy more supercars because the cars would become more exclusive', but would overall demand actually go up? I don't reckon. So that model is pretty reliable.


Wth are you on about? You didn't even answer my question.
Reply 7
Avatar for riyaaaaa
riyaaaaa
4
You just show the demand curve shifting to the right for vans. Supply curve does not shift.
Original post by Jane122
Wth are you on about? You didn't even answer my question.


Whatever crap you tagged me in didn't even have a question to what are you on about
Reply 9
Avatar for Jane122
Jane122
OP
2
Original post by riyaaaaa
You just show the demand curve shifting to the right for vans. Supply curve does not shift.


Why doesn't it shift ?
Reply 10
Avatar for Jane122
Jane122
OP
2
Original post by MouseyBrown
Whatever crap you tagged me in didn't even have a question to what are you on about


Don't. Be. Rude.
Original post by Jane122
Why doesn't it shift ?


It doesn't have to. The main thing to consider here is that vans have become popular. What does that mean? More people will demand vans causing the demand curve to shift to the right. When that happens, the equilibrium shifts and the quantity demand and supplied increases. So you've shown that without shifting supply curve.
Original post by Jane122
Why don't supply move? I don't understand what you're talking about! You can't shift the demand curve and increase the price at the same time! That goes against cetruis paribus


The demand curve shifts because as you said in your original post the demand for vans increases. This could be for any number of reasons, eg a successful advertising campaign for vans or improvements in the quality of vans. This rightward shift in demand pulls up the price. The supply of vans does not shift because supply is simply responding to the rise in price so it is a movement along the supply curve.
You are using the wrong diagram to explain this. Use a PPF diagram.

What you are trying to show is price goes up, due to the increase of demand, (demand shifts) and there is movement along the supply curve, as firms expand their output of vans. this does not necessarily represent the firm reallocating its factors but it illiterates the effect of the increase in demand for vans on the market on the market.
(edited 7 years ago)
Original post by Jane122
according to the law of demand you can't have a rise in demand without reducing the quantity wtf!!!!!

@MouseyBrown @azizadil1998 @kas9 @zainyyyyy


if the demand line shifts to the right assuming higher demand, then surely quantity does increase
Reply 15
Avatar for Jane122
Jane122
OP
2
Original post by zainyyyyy
if the demand line shifts to the right assuming higher demand, then surely quantity does increase



i thought you can't shift demand and increase the price at the same time? beause shifiting the curve means price is fixed
shift is when you move the demand either upwards or downwards. What you are talking about is an extension or contraction, this is where the point on the curve moves
Original post by Jane122
i thought you can't shift demand and increase the price at the same time? beause shifiting the curve means price is fixed
Reply 17
Avatar for Jane122
Jane122
OP
2
Original post by riyaaaaa
It doesn't have to. The main thing to consider here is that vans have become popular. What does that mean? More people will demand vans causing the demand curve to shift to the right. When that happens, the equilibrium shifts and the quantity demand and supplied increases. So you've shown that without shifting supply curve.


Screen Shot 2016-09-26 at 15.42.46.png like this ?
Original post by Jane122
i thought you can't shift demand and increase the price at the same time? beause shifiting the curve means price is fixed


Shifting the demand curve pulls up the price and this increase in price is what the suppliers respond to.
Reply 19
Avatar for Jane122
Jane122
OP
2
Original post by mapotts53
Shifting the demand curve pulls up the price and this increase in price is what the suppliers respond to.


but i thought you drop the assumption of cetrius paribus when you shift the curve ? so price doesn't affect demand? so price should stay fixed ?

Quick Reply

Related discussions

Latest

Trending

Trending

Articles for you