The total resource earnings in equilibrium is equal to $1,000 and it is calculated by multiplying the units of resources (100) with price per unit of resource ($10).
What is the demand and supply curve?
- On a graph, prices are plotted along the vertical axis and units of a product are plotted along the horizontal axis to represent the demand and supply curves.
- Generally speaking, supply is assumed to slope upward because suppliers are prepared to create more when prices rise.
- In general, demand is thought to slope downward since consumers tend to buy less when prices are greater.
- The market-clearing price i.e., the price at which supply and demand are equal—is represented at the intersection of the two curves.
- Numerous factors can affect price changes (consumer, technology, weather and consumer preference). Elasticity is the term used to describe the link between changes in price and the demand and supply for an item (or service).
- While elastic commodities are highly responsive to price changes, inelastic goods are somewhat insensitive to price fluctuations.
- The demand and supply ultimately determines the earning potential of a business.
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