If the price of a good increases, what happens to demand? If the price of a good decreases, what happens to supply? Does a change in price create curve shifts? Use Appendix C
We will be happy to critique your thinking on this. Think of gasoline...what happens to demand if the price goes to six dollars a gallon?
If price increases, demand drops. If prices drop, there will be more demand than there is supply, so supply drops.
To understand the relationship between price and demand, we need to refer to the Law of Demand. According to this law, if the price of a good or service increases, the quantity demanded decreases, and if the price decreases, the quantity demanded increases.
Now, let's look at the relationship between price and supply. The Law of Supply states that if the price of a good or service increases, the quantity supplied also increases, and if the price decreases, the quantity supplied decreases.
In terms of curve shifts, a change in price does not directly cause shifts in the demand or supply curves. Instead, changes in price cause movements along the existing curves. However, changes in non-price factors such as income, preferences, expectations, and the price of related goods can lead to shifts in the demand or supply curves.
To gain a more in-depth understanding of these concepts and see the demand and supply curves, you can refer to Appendix C in your study material. Appendix C should provide visual illustrations and explanations of these economic concepts and their relationships.