Demand and Supply Analysis Essay Example | Topics and Well Written Essays - 1250 words

Demand and Supply Analysis - Essay Example b) The relationship between the quantity demanded and the price is of negative relationship while that between quantity supplied and price shows a positive relationship. Quantity demanded of a commodity according to the theoretical information is the quantity of a commodity that a buyer is willing and able to purchase at the prevailing market prices (McEachern, 2011). When prices go up few buyers will be willing to buy depending on the nature of the good. This shown by the negative gradient depicted by the demand function of -2, it means that for every 1 unit increase in price quantity demanded reduces by 2 units. Quantity supplied on the other hand is with reference to suppliers and producers. It is defined as the quantity of goods and services that a provider is willing and able to produce and supply at the prevailing market prices (McEachern, 2011). Suppliers are always willing to supply more when prices are high as opposed to when they go down. This is depicted by the positive gr adient of the supply curve of +1. This means that if prices are increased by 1 unit, quantity supplied also increases by 1 unit. c) The slope of the demand function is -2; this means that an increase in price by 1 unit solicits a reduction in quantity demanded by 2 units. d) The slope of the supply function is of +1. This means that an increase in price by 1 unit solicits an increase in quantity supplied by the same unit. 12. ... 1. Among the ten countries, price elasticity of demand for food is high in Tanzania and it decreases sequentially with Tanzania having the highest price elasticity all the way to the US having the lowest elasticity. This is explained by the general principle that with general increase in income demand for food normally goes down while that of luxury and junky foods goes up (Tucker, 2008). Developing countries still have a population that is still of the need of basic needs like food, this explains the reason as to why developing countries like Tanzania have high price elasticity of demand. Both the quantity demanded and supplied of the commodities in Tanzania is composed of food and food products. The agricultural products also add to the supply of food into the economy (Tucker, 2008). Consumers in developing countries with relation to food are related to then food prices and their income. Rise in income in such countries leads to an increased consumption. Changes in prices also thre aten the food consumption patterns in such countries. The only food consumption that is not threatened is that of basic staple foods. This implies that there is high purchase of foods and foodstuffs in Tanzania than the same is for the US. High purchases are realized in staple foods. On the contrary, consumption of high value foods like meat experiences high purchases in the US (McEachern, 2011). 2. Fig. 2: Tax effect on demand and Supply 3. 4. 5. 6. 7. 8. 9. 10. 11. Before taxation is imposed on the commodity, the equilibrium quantity is Qe while the equilibrium price is Pe. Tax has the tendency of normally increasing prices of commodities as well as