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Economic Theory- - Assignment Example

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The price at the market equilibrium point is called the equilibrium price and the quantity at that point is called the equilibrium quantity. In the case of Arizona, the supply of gas decreased…
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Economic Theory-Assignment
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Arizona The intersection point of supply and demand curve is called the market equilibrium. The price at the market equilibrium point is called the equilibrium price and the quantity at that point is called the equilibrium quantity. In the case of Arizona, the supply of gas decreased without any change in demand. The supplied quantity of gas thus was not enough to supply the original demand of gas in Arizona and hence the consumers had to suffer. Moreover this caused the prices to rise with the view that it would decrease the demand of gas in Arizona. Both the demand and supply curves would undergo a change owing to the spontaneous cut down of gas supply in Arizona.
The demand curve would fall on the right side and the market equilibrium would be unstable. This is because the gas company would not be able to meet the demands of the consumers and hence the supply should be increased to meet the demand. Moreover the supply curve would also shift towards the left side as the supply of the gas should be increased in order to satisfy the demand of the consumers of gas. Both the demand and supply curve would shift towards opposite side as mentioned above. As the demand curve would move towards the right and supply curve towards the left this would result in spontaneous price inflation. Thus automatically because of the cut down in gas supply the price of gas would increase in order to compromise with the demands of the consumers. Read More
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