1.a. In Figure 1, below, which curve is a demand curve? Which is a supply EXPLAI

Question

1.a. In Figure 1, below, which curve is a demand curve? Which is a supply EXPLAIN b. Which of the following markets probably has supply and demand curves most like those in Figure 1? (bl) the upstate New York market for fresh sweet corn during a normal week in late August, when the corn is harvested; (b2) the world wholesale market for plain t-shirts during a two year period; (b3) the world market for crude oil during a normal 3 month period; (b4) the market in NY state for apples imported from outside the state during the month of September. Explain why the supply and demand curves in the market you picked could look like the ones in Figure 1. Explain why at least one curve (supply or demand) in each market you did not pick probably does not look like the one in Figure 1. In each case, explain why the length of the time period matters cost per unit of output MB PMC output

Explanation / Answer

SMB curve is Demand curve as it slopes downwards

Rising segment of PMC ( private marginal cost) curve is the firm's Supply curve.

Answer to MCQ is b4)

The shape of two curves is such that demand curve is quite elastic & supply is initially highly elastic & then slopes upwards

Since demand will be downwards sloping for all cases, but initially the supply curve is elastic, as PMC curve is almost horizontal,

So if the time period corresponds to a short run time period, then supply will be largely inelastic, only in larger time period supply can become highly elastic & thus shape tends to be horizontal

For option b1, since only a week time period is given so can't increase supply in wake of increasing demand, thus supply curve should be quite inelastic, so it's wrong

For b3, Demand for crude oil is highly inelastic , but depicted dd curve is quite elastic, so option b3 is wrong

Option b2) the demand for plain t shirt is inelastic as it is not a kind of luxury good, thus demand curve is not correct .

Correct option is b4)

Demand for imported item is highly elastic & supply is also very elastic in the beginning,

Length of time period matters from the perspective of the supply curve, supply can't be changed in the short run so the curve is highly inelastic in short run, supply can be adjusted according to market sentiments oy in the long run & it becomes elastic then

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