Macro Economics Coursework Example | Topics and Well Written Essays - 500 words

Macro Economics - Coursework Example Demand curves are curves that show a relationship between the price of a product and the quantity demanded. It is shown when the values of price are plotted against the values of quantity demand. It shows what consumers are willing to buy at various prices. The demand curve has a negative slope (-5) which indicates that an increase in there is an inverse relationship between price and the quantity demanded. The demand curve therefore shows a negative relationship between the variables, which means that an increase in price causes a decrease in demanded quantity and a decrease in price causes an increase in quantity demanded. The two therefore have an inverse relationship. Increase in the income of consumers will lead to increase in demand for widgets. This is because widgets are normal goods and change in income results to a positive change to demand of normal goods. There will therefore be a shift in demand curve for widgets to the right as a result of the increased demand. The shift in the demand curve will cause to an increase in the quantity of widgets demanded at each level of price. The shift to the right will cause an increase in demand and therefore the demand value in the equation will increase with increase in income. A supply curve is a curve that shows a relationship between price and quantity supplied by the sellers. The supply curve slopes from the left to the right. This shows the direct relationship between quantity supplied and price. The slope of the supply curve has a positive value (+3.3). This indicates that there is a positive relationship between price and the quantity supplied. Price and supply are therefore directly related. Change in price of the input used to produce will result to a decrease in supply of the widgets. This will result to a shift in the supply curve upwards indicating a decrease in supply. Less quantity of the widgets will therefore be supplied at the same price levels to enable the suppliers