Price system, Microeconomics

Price System:

Demand is the quantity of a commodity that consumers are willing and are able to buy at a given price at a given time period when all other things remain the same. A change in any of the other determinants of demand apart from the own price of the commodity (income of consumers, prices of related commodities, consumer tasted demand and shift the demand curve. A change in own price of the commodity will cause a change in quantity demanded and produce a movement along the same demand curve

Supply on the other hand is the quantity of a commodity that suppliers are willing and are able to offer for sale at a given price at a given time period when all other things remain the same. A change in any of the other supply factors apart from the market price of the commodity (prices of inputs, technology, taxes or subsidies, prices of other commodities, weather/natural phenomena and population of suppliers) will cause a change in supply and shift the supply curve. A change in market price of a commodity will cause a change in quantity supplied and produce a movement along the same supply curve.
 
At equilibrium, the market clears. That is, quantity demanded is equal to quantity supplied. A change in demand or supply will cause the equilibrium price and quantity to change.

Whenever the equilibrium price is realised to be unfairly high or low it may necessitate the setting of a price ceiling or a price ceiling or a price floor by government. Price ceiling is a legal price set below the equilibrium price.

Posted Date: 1/2/2013 1:09:50 AM | Location : United States







Related Discussions:- Price system, Assignment Help, Ask Question on Price system, Get Answer, Expert's Help, Price system Discussions

Write discussion on Price system
Your posts are moderated
Related Questions
Short run equilibrium - Perfect competition: In the short-run, the perfectly competitive firm maximizes its profit by producing output where MC=MR=P. This is shown in the diag

A firm's production function is given by Q = √LK . The price of labour is w and the price of capital is r. a. The price of labour is $5 and the price of capital is $20. What is


write characterstics of duopoly

A monopolist faces the inverse demand for its output: p = 30 – Q The monopolist also has a constant marginal and average cost of $4/unit. The government is seeking ways to collect

uses of time series in indian economy

Graphical Representation of Various Returns: Diminishing Returns: If the TP curve is as shown in the adjacent Figure, then the MPL given by tanθ  is throughout less than the A

Explain the how the classical school views the role of markets and government intervention in fighting business cycles The classical school believes in the smooth functioning o

if the marginal production of labor is rising, is the marginal cost of production rising or falling? Briefly explain

What are the two types of government cash transfer programs in the U.S., used to help households achieve income security?  Provide examples of each. The two kinds of government