Essay about Supply and Demand Curves

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Supply and Demand Curves
John Doe
ECO/365
June 5, 2014
I.M. Professor
Supply and Demand Curves
Answer the following questions

Write the definition for each of the following:

1. Law of Demand - A microeconomic law that states, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa. The law of demand says that the higher the price, the lower the quantity demanded, because consumers’ opportunity cost to acquire that good or service increases, and they must make more tradeoffs to acquire the more expensive product (Investopedia US, 2014).

2. Law of Supply - A microeconomic law that states, all other factors being equal, as the price of a good or service increases, the quantity of goods or services that suppliers offer will increase, and vice versa. The law of supply says that as the price of an item goes up, suppliers will attempt to maximize their profits by increasing the quantity offered for sale (Investopedia US, 2014).

Which of the following graphs best demonstrates the law of demand?

a) I
b) II
c) III
d) IV – correct answer. “Quantity demanded rises as price falls, other things constant. Or alternatively: Quantity demanded falls as price rises, other things constant.” (Colander, 2013, p. 78)

Which of the following graphs best demonstrates the law of supply?

a) I
b) II
c) III – correct answer. “Quantity supplied rises as price rises, other things constant. Or

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