AS economics- Demand and supply.

Hey,
How do you 'comment on the size of the respective shifts in D and S, ideally including elasticity of demand or supply'?
:woo:

Reply 1

bigmo7

17

Supply shifts up/down? Demand shifts up/down?

It might be easier if you posted the whole question...

Reply 2

bethie_boxers

OP

bigmo7

Supply shifts up/down? Demand shifts up/down?

It might be easier if you posted the whole question...

Using a demand and supply diagram, comment on the extent to which changes in the global demand and supply of food may have affected the market equilibrium.

I know from the text that demand has increased and supply has decreased. Therefore shift left supply and shift right demand.

Reply 3

KDSOC

You draw the diagram and show the changes in D and S and therefore show the new equilibrium price. As it is food the demand and supply will probarly be inelastic but the demand more inelastic.
Then comment on the extent by saying prices will not have changed that much due to the inelastic nature of the demand and supply of food as it is a necessity/

Reply 4

Hoodo

Is there not a markscheme for that paper? I'm sure that you'd have to make sure the curves aren't just 45 curves (therefore taking into consideration PES/PED).

Reply 5

paul_blakeman

you need to evaluate how far each one will move. For example, supply may not have decreased by that much, and demand may have increase by a higher proportion. So one thing to note is relatively how much has each shifted. Also, as has been noted, you need to comment on elasticities. The price elasticity of demand tends to be quite elastic, as food is a necessity. Supply depends very much on the weather, but in the short term it is highly inelastic, as there is a set amount of supply as growth of agricultural goods tends to be annual. Hope this helps and if you need any more help feel free to PM me :smile:

Reply 6

KDSOC

paul_blakeman

you need to evaluate how far each one will move. For example, supply may not have decreased by that much, and demand may have increase by a higher proportion. So one thing to note is relatively how much has each shifted. Also, as has been noted, you need to comment on elasticities. The price elasticity of demand tends to be quite elastic, as food is a necessity. Supply depends very much on the weather, but in the short term it is highly inelastic, as there is a set amount of supply as growth of agricultural goods tends to be annual. Hope this helps and if you need any more help feel free to PM me :smile:

If something is a necessity it has an inelastic Price Elasticity of Demand.

Reply 7

TWF

13

bigmo7

Supply shifts up/down? Demand shifts up/down?

Lol, that's exactly what our teach told us NOT to say in the exam. It's not like producers just SHIFT supply to the left, is it?

OP, say: 'producers respond to the price signal by reducing supply, this is illustrated on the diagram through a shift to the left of the supply curve to S2'. Something along those lines.

AS economics- Demand and supply.

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