Fiscal And Monetary Policy

FISCAL MONETAY POLICY1 . Aggregate pick up and pictureFor vestibular sense toll the request curve slopes downwards , this means that , other remaining semen to , more quantity of a commodity will be use uped at a lower value than a high bell . Similarly the cede curve of the commodity commonly slopes upwards . This means that the producer will offer to contend a larger quantity of the products at a high price than a lower priceThus the quantity solicited and the quantity supplied varies with price The price which will tend to settle down or come to stop consonant in the securities industry is one at which the quantity call fored is equal to the quantity suppliedThis price , at which demand and supply atomic number 18 equal , is know as an proportionality price , since at this price , the forces of demand and supply are balanced or are in correspondenceWhen price waterfall below balance , demand for the good sum ups which in repeal surpass supply . This creates a shortfall of the goods in the market . Suppliers respond to this shortage by increasing the price . The price would therefore be increased until it reaches the equilibrium range . The communication is true If price claims beyond the equilibrium point suppliers would supply more of the good (Law of Supply . There would be competitor amongst the suppliers to sell surplus . The end result would be a reduction of prices until the point of equilibriumDiagrammatically , this is represented as below . sSurplusPriceEquilibrium DeficitDemandQ QuantityFigure1 : equilibrium priceTherefore the equilibrium between demand and supply or market equilibrium determines the price in the market . Prices come to stay in the market at the level where price come to stay in the market at the level where demand and supply curves intersect each other2 .

As shown in control 2 above SS is the supply curve and DD is the demand from DD to D D the supply curve remaining in the same equilibrium price will source to op are which the new demand curve D D intersects the supply curve SS at the point R . a result of increase in demand , equilibrium amount demand and supplied will also rise to oq On the contrary , if the demand decreases from DD to D D the equilibrium price will fall to op and equilibrium will fall from QP to Q1P1Effect of flip in supply on equilibrium priceAs shown in depend 2 demand curves remain the same but it is the supply curve which changesSs is the supply curve which intersects the demand curve DD at the price op . if now the supply curve increases from SS to S S the equilibrium amount will fall to OMAD shifts because of the following reasonsCost of production : increase in cost of production increases the equilibrium price of a commodityIncomes of the consumers : the higher the income the more the demandSize of race : as size of population increases more goods will be demanded by customersDiagrammatically , this...If you want to get a full essay, order it on our website: Orderessay

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