Supply and Demand

Supply and Demand

Supply and Demand: Advertisement will lead to an increase in the pet shop business if much focus is channeled to local television ads

Supply and Demand

Advertisement will lead to an increase in the pet shop business if much focus is
channeled to local television ads. Among the factors that help increase sales of a business,
one of is advertisement as it creates awareness among a wide range of consumers (Vatter,
2017). Not unless the consumers are aware of the pets available in the market, there will
always be fewer sales. Customers need to know the availability of a product and get educated
on its uses and advantage to them. When consumers realize the available products in the
market, those who are interested will make a point of accessing the product. Consumers are
not all-knowing, which means they need to be informed about the available pets for sale if
they are to make any purchase. Consumers come and go, which implies there is a need to
advertise to tap more customers. As the advertisement levels increase and the demand for the
product or service increases, the demand curve shifts to the right (Marwala & Hurwitz, 2017).
A change to the right in a demand curve shows that more sales are experienced in the
product.

A Shift in the Demand Curve

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As illustrated in the graph, the arrows point in the direction of the shift. The shift on the
demand curve to the right shows an outward change.
Question Two

A bargain to reduce the half the price in the supply chain will positively affect the
supply of wood. An agreement with the supplier on the price at which to supply the wood,
then definitely the supply will increase. Although suppliers are more willing to supply goods
when the price is higher to make more profit, any other local arrangements with the supplier
are also advantageous (WYsOCKI & Block, 2019). Business is about coming into terms both
between the buyer and the seller. Therefore, if the agreement is balanced, then the business
can kick-off. If the wood supplier agrees to resource the stock in bulk, but at a lower price,
that affects the supply curve positively. The shift to the supply curve will move to the right.
When the supply curve shifts to the right (WYsOCKI & Block, 2019), it is also termed as an
outward shift of the curve.

A shift of the Supply Curve

The illustration on the graph shows a shift of the supply curve to the right. An
outwards change of the supply curve implies when the price is higher, supply increases as

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well. In this case, the supply is supplying at a slightly higher price, meaning that he or she
will be more willing to provide the wood at that price.
Question Three

When the marijuana business starts at first, activities pick up well, and profits will be
high since competition is very low. Even though the government decides to cut off a 20%
profit made from the sales, the effect would be less. It is understood that the business has
already gained loyal customers, and above all, there is less competition. The profits made
would be less affected by the 20% charge. More sales are expected from the business since it
is currently the only one standing in the market. Loyal customers are an assurance to the
company that even though the government charges a certain amount of money, it is easy to
recover from the customers. Since the business has already won the loyalty of some
customers, profits are expected to maintain high. In this situation, the marijuana business will
be experiencing inelasticity as many market dynamics come to play. The fact that the
business accumulates different market changes, the market inelasticity is encountered by
allowing all those factors to affect the business before it firmly establishes itself.

Part B: Quantitative Problem

Given QD = 1000 – 1.5P
Where P -> price
QS = 50 + 2P
Price Quantity
Demanded

Quantity
Supplied

Surplus Amount or
Shortage Amount

200 700 450 250
220 670 490 180
240 640 530 110
260 610 570 40
280 580 610 (30)
300 550 650 (100)
320 520 690 (170)
340 490 730 (240)

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QD = 1000 – 1.5p QS = 50 + 2P
QD = 1000 – 1.5(200) QD =700 QS = 50 + 2(200) QS = 450
QD = 1000 – 1.5(220) QD = 670 QS = 50 + 2(220) QS = 490
QD = 1000 – 1.5(240) QD = 640 QS = 50 + 2(240) QS = 530
QD = 1000 – 1.5(260) QD = 610 QS = 50 + 2(260) QS = 570
QD = 1000 – 1.5(280) QD = 580 QS = 50 + 2(280) QS = 610
QD = 1000 – 1.5(300) QD = 650 QS = 50 + 2(300) QS = 650
QD = 1000 – 1.5(320) QD = 670 QS = 50 + 2(320) QS = 690
QD = 1000 – 1.5(340) QD = 490 QS = 50 + 2(340) QS = 730

Question One

The equilibrium price is on the demand curve is at 260, while the supply curve is at
280. Both the supply and demand curve intersect when the price of the supply cure is at 280,
and that of the demand curve is at 260. The equation is as computed below
(QD = 1000 – 1.5(260)) = (QS = 50 + 2(280))
(QD = 1000 – 390) = (QS = 50 + 560)
(QD = 610) = (QS = 610)
QD =QS

Question Two

Given that QS = 100 + 2P
Where P -> price
QS = 100 + 2(200) QS = 500
QS = 100 + 2(220) QS = 540
QS = 100 + 2(240) QS = 580
QS = 100 + 2(260) QS = 620

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QS = 100 + 2(280) QS = 660
QS = 100 + 2(300) QS = 700
QS = 100 + 2(320) QS = 740
QS = 100 + 2(340) QS = 780
Therefore the new equilibrium is attain when ;
(QD = 1000 – 1.5(280)) = (QS = 100 + 2(240))
(QD = 1000 – 420) = (QS = 100 + 480)
(QD = 580) = (QS = 580)
QD = QS

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Reference

Marwala, T., & Hurwitz, E. (2017). Supply and Demand. In Artificial Intelligence and
Economic Theory: Skynet in the market (pp. 15-25). Springer, Cham.
Vatter, M. H. (2017). OPEC's kinked demand curve. Energy Economics, 63, 272-287.
WYsOCKI, I. G. O. R., & Block, W. (2019). Homogeneity, Heterogeneity, the Supply Curve,
and Consumer Theory. Quarterly Journal of Austrian Economics, 21(4), 398-416.

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