A GOOD question about supply and demand. im so confused!?
see, i have this question for HW, "a tax on per unit subsity on each tire sold." how is supply affected.
okay so a more expensive tire would obviously make demand go down.
but what about supply. is it
A. the supply go up because there is now going to be more tires at the factory they can't get rid.
B. Because the demand goes down, they stop ordering as many tires hence supply goes down.
im so confused. can someone please explain this and give some easy example, i feel really stupid one this subject.
and is this statement right. so are supply and demand are always paralell. if demand goes up supply goes up. right if demand goes down supply goes down.
- 1 decade agoFavorite Answer
Okay chill bro I got ya. First off the last statement you said is correct... sort of. You see there are other factors that are placed on a business who is trying to sell goods and make the most possible money doing it. Such as the tax. The Tax will be levied at the time of the sell that is what subsity on each tire sold means. What this means is the tax will cause the Quantity demanded of tires to decrease because due to the tax, they will cost the consumer more money. Tires will be sold, but there will be a deadweight lose that is developed on the demand curve and it will shift to the right. now imagine the S&D curve, the Demand curve slopes downward because at a lower price more of any normal good will be demanded more and the Supply curve slopes up to the left because the more money a firm can get for an item the more they will make of it. Now the Deadweight loss from the tax shifts the demand to the right off the equilibrium and creates a new price. The deadweight loss is the triangle made by this shift and is the distance of the Demand curver shift. What actually happens, the government says we can raise our revenue if we raise taxes this product that would be true if the same number of the product was going to be sold. However, a tax will lower overall buying power within the market and thus will prevent many consumers to purchase the problem till the tax goes away or a substitute is found. All this results in less of the product being sold and then less taxes collect than before. Soon a surplus will be in the market due to so many unsold products, the businesses then have to lower the price just to sell products which is represented by a left shift in the supply curve and then the original price before the tax will be approached,Source(s): toooo easy!
- cironeLv 43 years ago
you're literally perplexed. a metamorphosis in value will effect in a metamorphosis in quantity demanded or quantity provided. call for and grant can purely be stricken by utilising non-value components. so a fall in value ends up in improve in quantity demanded yet a fall in quantity provided until you are able to tell me which factor is changing i.e the non-value factor, there is purely approximately no way for all and sundry to charm to the graphs simply by fact we've not any thought how call for or grant is reacting