Supply Chain Demand and Market Equilibrium

Supply and Demand and Market Equilibrium

a) On a supply and demand graph, like the one shown below, identify either the surplus or shortage in the market when the price is P2 and explain what will happen to the price and the shortage/surplus in order to reach market equilibrium.

b) On a supply and demand graph, like the one shown below, illustrate the effect of the following 4 actions and describe all the steps involved in the market price and quantity supplied and demanded moving from the starting equilibrium point at Pe Qe to the new one:

1. An increase in rents for all high street stores

2. A better, more popular version of the businesses only product is launched successfully

3. Due to a massive increase in GDP over the year, customers start to treat themselves to the luxury car market that the company supplies

4. VAT is reduced from 20% to 10% by the UK Government

5. VAT is increased past the point of diminishing returns because the market equilibrium of the supply and demand curve are gradually becoming closer together.

6. On the graph this is shown by the supply curve vutting the demand curve and 0.35, starting high and rapidly downward sloping to show the effect of the demand curve's actions on the supply curve.

7. On a supply and demand graph, like the one shown below, illustrate the effect of the following 4 actions and describe all the steps involved in the market price and quantity supplied and demanded moving from the starting equilibrium point at Pe Qe to the new one.

8. Due to a massive increase in GDP over the year, customers start to treat themselves to the luxury car market that the company supplies.