Micro economics Essay Example | Topics and Well Written Essays - 2250 words

Micro economics - Essay Example Moreover, a shift in other variables with price as an exception would cause a shift in the whole of the demand curve. The shift in the whole demand curve can be attained to be a shift in demand. Income Certain changes or alterations in income may mean increases or decreases in demand. A commodity whose demand tends to rise with a corresponding rise in income can be called a normal commodity. A commodity whose demand falls with a corresponding increase in income can be called an inferior commodity. This means that increases in income would tend to increase the demand for the mp3 player in the market. This is hence true since this is economically measures by economic experts in the economic field. Prices of other commodities Slight alterations or changes in the pricing of other commodities may result to a rise or fall in demand. A commodity that results to a rise in demand for another commodity when its price tends to increase can be called a substitute commodity. A commodity that brin gs about a fall in demand for another commodity when its price tends to rise can be referred to as a complementary commodity. This ultimately means that, an increase in the price of the mp3 player of another manufacturer or brand, may result to a corresponding rise in the demand of the original mp3 player in question, since it may be used as a substitute for the other commodity. Even if, one takes the case of beverage giants in the name of Coke and Pepsi, one realizes that an increase in the price of Pepsi would result in the rise, in demand of Coke. This is solely because these two products can be considered to be substitutes. . Number of buyers in the market A rise in the number of buyers, both potential and current buyers, would result to a rise in the demand for the mp3 player. Demand can be mainly based on the rise of population in that area. Future pricing actions A rise in the anticipated future prices of a commodity would certainly tend to cause a rise in the current demand. A fall in the anticipated future prices of a commodity would certainly decrease the future price. So a firm must highly be considered its future pricing of the mp3 player in question. Consumer tastes and preferences Shifting of the demand curve may also arise due to changes in the consumer tastes and preferences. If the consumers’ taste changes and starts liking more of the mp3 player, there would be a consistent rise in the quantity demanded. Derived quality Shift in the demand curve can be as a result of changes in the quality derived from the mp3 player by the consumer. If commodities produced are of a higher quality than the rival commodity, then this would bring a rightward shift of the demand curve (Heigy 1945, p.453). 2. The demand and supply schedules for wheat in a free market are as follows: Price per tonne (?) 120 160 200 240 280 320 360 400 Tonnes demanded per week 725 700 675 650 600 550 500 425 Tonnes supplied per week 225 300 400 500 600 750 1000 1300 I. Draw and briefly comment the demand and supply curves on the following diagram II. Define what is the equilibrium price and state what the equilibrium price is from your graph ? The equilibrium price is 280. The equilibrium price from my graph is 260. III. Suppose the government fixes a maximum price of ?200 per tonne. What will be the effect? Suppose the government fixes a price ceiling of 200 per tonne, it would result to certain effects. First, a disequilibrium