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Applications of Supply and Demand Analysis peeping of puppy and Demand Boas "Appropriate to use when competition exists among buyers and sellers. "The interaction of buyers and sellers covers all types of prices and goods for which a market exists. =Interaction of supply and demand solves two major economic problems simultaneously- the quantity sold and the price. =Forces affecting supply and demand could come from any number of influences. Effects of a Change In Demand During an Immediate Period Figure 5-1 (a) shows what happens | in the immediate period (during the typhoon), as consumers brace for emergency. Supplies are fixed and demand is fairly inelastic. An increase in demand could lead to a shift of the demand schedule — more goods are bought as long as. these are available. The ensuing price increase could be steep as. shelves are emptied. Price The initial equilibrium price is P, and quantity is Q,. After the increase in demand, when all supplies are being bought, the price shifts to P, but quantity stays the same (in the immediate period the supplies are fixed.) | Figure 5-1(a)