AB 204 Unit 3: Supply and Demand and Market Intervention
Supply, Demand, and Government Interventions in Markets
The Discussion topics include the market forces of supply and demand, supply and demand model, supply and demand curves, government failure, market failure, and the impacts of government policy of price controls on the interactions of supply and demand, prices and quantities in the market economy.
Respond to two of the following Discussion topics. Read Chapters 4 and 6, and remember to include references and links to the websites that you feel are important contributors to your posts (comments).
Topic 1: Supply and demand is the foundation of the market economy and the basis of the study of economics.
Why supply and demand is considered as factors that make market economies work? Why supply and demand drives the market economy? Provide an example of the role of supply and demand in business decision making.
What is the difference between a movement along and a shift of the demand and supply curves? What are the factors that lead to shifts in supply and demand curves?
Topic 2: Without government intervention, the market price moves to the level at which the quantity supplied equals the quantity demanded through the interactions of supply and demand. But governments intervene in the market now and then to control prices.
What are the market inefficiencies the price controls measures such as price ceilings and price floors create? Why do price ceilings and price floors lead to productive and allocative (marketing) inefficiency?
Who benefits and who loses from government interventions in markets through price control methods known as price ceilings and price floors? Why price controls are used despite their well-known problems?
Unit 3: Topic 1: Discussion Post
Hello Professor and Class,
Supply and demand are considered factors that make market economies work because if they are in equilibrium with one another, then the market will be in equilibrium as well. If the company was able to come up with an equilibrium price, then they will not have to suffer a surplus of good that they can’t sell. An example of this would be a supply and demand of selling Halloween costumes. The equilibrium price happens when the supply and demand of Halloween costumes is equal. If the supply of Halloween costumes is greater than the demand for them, then there will be a surplus of costumes.
The difference between a movement along and a shift of the demand and supply curves is that a movement along a supply curve, as stated in our text book, is called “a change in the quantity of supply”. The movement along a demand curve is called “a change in quantity demanded”. Now, a shift along the supply curve is called “a change in supply” and a shift along the demand curve is called “change in demand”. The factors that lead to shifts in the supply curve are changes in prices for production. For example, if the price of coffee beans rise, then the company will produce less coffee which results in a shift in the supply of coffee. The factors that lead to shifts in the demand curve are how much of that good is demanded by the consumers. If during the winter, more people want to buy more coffee to stay warm, then the demand curve will shift to the left.
Mankiw, N. G. (2015). Principles of Macroeconomics, 7th Edition. [Kaplan]. Retrieved from https://kaplan.vitalsource.com/#/books/9781305156067/
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