Really quick question, I have a microeconomics exam tomorrow

>>1237096
Because lower price increases demand but decreases supply and a higher price decreases demand but increases supply. Balancing to an equilibrium.

>>1237096
This question seems insane to me.

Price changes both supply and demand. As price drops supply usually drops as it's less profitable to produce, and demand increases as it's now a cheaper alternative to other products. Oil pricing comes to mind, the price dropped like a fucking stone, and supply has dropped, not sure about demand.

Is this bait and/or am I retarded?

Took me a minute to figure it out.

The effect of price just changes the equilibrium point on the CURRENT demand and supply line i.e. it moves along the line.

Price doesn't SHIFT the demand or supply curve in any way. A shift occurs from other factors, such as new competition in the market.

Well, I don't agree with that statement.

>>1237096
Exogenous variables from outside the model are what shift supply and demand curves not price which is an endogenous and reflects those changes. Stated more simply--price is dependent on supply and demand, not the other way around. It's the result of the competing forces of supply and demand finding an equilibrium.

>>1237096
Pretty sure the question just wants you to show that the price will inevitably return to equilibrium.
If P > P*, Qd < Qs. Qs will decrease in conjunction with Qd increasing, and we end up back at equilibrium. Essentially the same reasoning applies for P < P*. I could explain this better with a graph, but I really can't be fucked.

>>1237171
You're confusing supply with quantity supplied and demand with quantity demanded. There's a very important difference.

>>1237188
I'm pretty good at this economics stuff BTW and promise this answer is what your professor is looking for. It's a very important concept for students to understand.

Nothing shown in the supply and demand curve model has an effect on the other. The supply and demand curves are an expression of the marketplace, the equilibrium price occurs at the intersection. Changes in supply or demand only come from factors outside the model (exogenous.) Examples are government rebates/fess, changes in consumer preferences, seasonal variations, newly discovered resources, population growth, ect. Those are what shift the supply and demand curves causing them to intersect at a new equilibrium price.

Equilibrium price is the result or product of those marketplace interactions.

>>1237188
this

>>1237188
But can't the price of a good influence the supply insofar as that other suppliers enter the market when they see potential profit to be made?

E.g., a hot new good that everyone and their brother rushes to produce to capitalize on the popularity?

>>1237242
The fact that more people will supply if there's a profit to be made is already reflected in the upward sloping supply curve. If price is high, quantity is high too.

An outward shift of the supply curve (or an increase in supply) happens when more suppliers enter the market (for exogenous reasons like new resources are discovered) and suppliers are willing to increase the amount supplied at any given price.

>>1237193
>You're confusing supply with quantity supplied and demand with quantity demanded. There's a very important difference.

You are going to need to explain that. How is supply not the quantity supplied and demand not the quantity demanded? You simply put quantity in front of it.

>>1237260
the quantity are the points on the X axis, basically the number of people buying/products sold.
price changes how many of something you can buy.
But a giant fire decimating the key ingredient of something changes the amount that CAN be supplied.

>>1237264
So supply or the quantity supplied drops while demand or the quantity demanded stays the same and price is likely to rise and a new equilibrium between supply and demand will be forged.

What did that have to do with supply being different from quantity supplied, and demand being different from quantity demanded?

this is why i switched majors from econ

>tell me why my personal opinions about the esoteric properties of subjective, unquantifiable measures like 'utility' are correct

>-5 points, the free market always wins

>>1237267
It does seem like their just playing with words to make simple ideas seem overly complicated so they can make absurd claims and obscure dissent with their fabricated lexicon. Something like watching people justify the prices of art.

>>1237267
>>1237278
Thats why no economist has ever predicted anything. The only thing economists are good at is describing something after it has already happened, and even then their explanation is probably not correct. Its pseudoscience for the most past with some factual math parts that actually make sense.

Change of supply or demand means change of demand curve or supply curve.
Price is endogenous variable in this model.
So any price change only makes demand and supply move along the original curve.
Condense this into 5 sentences.

>>1237326
>What cause a raise of supply(supply curve shifts right)?
Technological advance
Increasing price of complement goods
Decreasing price of substitution goods
And many more..
>What cause a raise of demand(demand curve shifts right)?
Increasing price of substitution goods
Decreasing price of complement goods
Increasing income
Preference
And many more..
So basically anything other than the price of that particular goods could be effecting the supply and demand.