February 27, 2017

Homework Help: Economis

Posted by Pallavi on Saturday, November 19, 2011 at 10:31am.

I have got an economics questions, and i did my personal revision by tying to work the question.

here is the question: using demand and supply analysis, explain the influence of the imposition of a maximum price and a minimum price on a product on price and quantity (10 marks).

My answer: Demand refers to the ability and willingness of a consumer to buy a particular product at a given time period. Demand should be backed up by the ability to pay for a particular product.

As the law of demand states that the other thing remaining the same: the higher of he price of a good, the smaller quantity demanded. Therefore if a maximum price is imposed on a product, the quantity demanded of that good will be lower though the price will remain high.With the maximum price imposed on the product which is represented in a graph, the effect on the graph would be, the dd curve will shift from D to D1.this will affect the quantity as it will decrease.

As for supply, it refers to the entire relationship between the price of a good or services and the quantity supplied. According to the law of supply, other thing remaining the same, it states that the higher the price,the higher quantity supplied. Therefore, if a maximum price is imposed on a product, it will result in a high quantity supplied. If a minimum price is imposed, it will have a low quantity supplied. The lower the price of a good,the lower quantity supplied.

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