Custom «Supply and Demand Curves» Essay Paper Sample

Figure is the normal supply and demand curves drawn with Price as the Y-axis and Quantity the X-Axis for corn before the demand for alternative fuels. The supply curve 2-3 slopes upwards indicating that suppliers would increase the price as the quantity increases; whereas the demand curve 1-4 slopes download showing that buyers would pay for lower price with larger quantity. The intersection of the supply and demand curves gives rise to an equivalent point E, with the price P and the quantity Q. The curve region 1-E-3 shows that the supply quantity exceeds the demand quantity – price should be lowered to P. The curve region 2-E-4 shows that the demand quantity exceeds the supply quantity – price should be increased.to P. In other words, both suppliers and buyers would often transact corn at the equivalent point E.

However, demand for alternative fuels would change the equivalent point E of corn. People would be willing to buy larger quantities of corn at the same old price. This would then shift the previous demand curve to a new demand curve as shown in Figure. The new demand curve then intersects with the fixed supply curve (no change of supply for corn) at a new equivalent point E1 with a higher price P1 and larger quantity Q1. In other words, the price increase, P to P1, is the direct effect caused by the alternative demand for fuels.