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The following are common errors that students make when discussing supply and demand. What is the mistake in each? (i) At equilibrium, demand equals supply (ii) The quantity of...

      

The following are common errors that students make when discussing supply and demand. What is the mistake in each?
(i) At equilibrium, demand equals supply.
(ii) The quantity of demand is greater than the quantity of supply
(iii) They move along the line from both ends to an equilibrium in the middle
(iv) The increase in demand causes an increase in supply

  

Answers


chris
The following are common errors that students make when discussing supply and demand. What is the mistake in each?
At equilibrium, demand equals supply.
The mistake is that they omit the concept of all other factors kept constant.
Therefore the correct answer is that at ceteris paribus, at equilibrium demand equals supply.
Another mistake is that at equilibrium it is the quantity demanded equaling the quantity supplied and not quantity is equal to supply.
The quantity of demand is greater than the quantity of supply.

It should be that below the equilibrium price, the quantity of demand is greater than the quantity of supply.

They move along the line from both ends to an equilibrium in the middle
The mistake is that nothing moves along the line from both ends but the supply and demand curve intersect at a point called equilibrium.
The increase in demand causes an increase in supply
An increase in demand only causes an increase in the price levels which shift towards the right of the demand and supply curve. Hence, an increase in the price triggers the suppliers to supply more.
chris10 answered the question on March 27, 2018 at 17:20


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