Diagrams How The Price Mechanism Affects Supply And Demand And Supply Of Supply, And Resources

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LIVERPOOL JOHN MOORES
UNIVERSITY

4051BUSBM Assignment

1. Explain with the use of diagrams how the price mechanism operates to allocate scarce
Resources. Use examples to illustrate your answer.

PRICE SUPPLY

P1 MARKET EQUILIBRIUM

DEMAND

Q1 QUANTITY S1

Price mechanism means price which affects demand and supply of goods and services. So supply goes up when demand is high and goes down when supply exceed demand. Supplier will lower their supplies because market prices are lower and enter into the market when price of goods rises to keep their firms running.
Market equilibrium means supply equals demand if there is shortage of goods firms would increase price and they will supply more
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Basically firms can change price to keep their customers in market for certain time.
Incentive- It motivates the producer and customers because higher price will bring more revenue and supply more to the producers. So customers will be interest in prices.
All firms are depending on market and customers because if customers will stop buying goods supply and demand of products will be down.

S1 S2

P1 p1 D2 P2 D1 D2 Q1 Q2 Q1 Q2 COMPUTER GAMES CAMERAS

I have used 2 diagram of price mechanism. Computer games as demand for games is high and they tend to earn more profit and they can sell games at high price per unit. So their demand will shift to right from D1 to D2. Where as in another diagram of cameras supply seems increasing but demand is same so it will result fall in price of cameras it means customers will react and they will buy products because price is

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