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Running head: SUPPLY AND DEMAND 1

Supply and Demand

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Institution

SUPPLY AND DEMAND 2

Supply and Demand

Part One

Demand function is QD = 120 – 4P; Supply function is QS = 2P; P max is 16.

The Y-axis depicts the Price

Demand and Supply Curves

Prescott Analysis

The graph indicates that the equilibrium point is where Price equals 20. At this point, the

supply in Prescott is 40 and the demand is additionally 40. It should be noted that demand is zero

when the price rises to 30. At zero prices, supply is also zero. The clients in the region are not

well-provided by the noticeable price ceiling. This is because of the trouble that the ceiling is

under the equilibrium point; a level at which the supply 2 (16) = 32 and demand is 120 (4) (16) =

56 (Cornwall & Cornwall, 2002). Therefore, this is an indication of more demand at such level

for housing that would be accessible. Consumers in this case are not served when the market is

out of equilibrium. This kind of market implies a loss linked to the price ceiling, depicting the

deficit in supply and thus the number of clients that cannot access housing. They are worse off

due to the fact that landlords fail to maintain their property. Economically, the situation is that

landlords are attempting to reduce expenses in a bid to enhance supply and meet demand. This

creates problems in the form of substandard supply (Grossbard, 2002). Majority of the

SUPPLY AND DEMAND 3

consumers getting the substandard supply of housing would typically hit the market for better

services. Consumers will be willing to pay more if there is need. The landlords are cutting

expenses to shift the demand curve by making more apartments profitable at the ceiling, but

finally are offering a decreased standard of rental clients than they would otherwise have, in case

the cap never existed.

Manhattan Housing Assessment

Manhattan house owners would support the policy that places a capacity on property

rents but not house rents. This is a policy that would push away some demand from the

apartments, towards housing. In an event, the demand for housing goes up, and the apartment

owners are free to charge any amount of rent, their profits will heighten in the short run.

However, in the long-run, the capability of the market to go back towards the equilibrium point

will portray its opportunity to enhance the supply of houses (Cornwall & Cornwall, 2002). The

situation might be difficult in Manhattan because bringing such market into equilibrium will be

complicated by adding supply. Prices will go up and therefore cause a decrease in demand. In

Manhattan, where new apartments can be built, new supply would ultimately enter the market,

reducing prices thus a new equilibrium point. House owners who benefit in the short-run would

only be advantageous until the new supply hits the market.

Part Two

There is scholarly research on the concept of minimum wages in economic circles. It is

argued that even if minimum salary aided in alleviating poverty, it was inefficient leading to

misallocation of resources. The minimum wage was re-invented at the time, and this resulted into

decades of data that permit for proper evaluation of minimum wage impacts. Meta-analysis for

the early 2000s indicated that through the following years, the minimum income declined

SUPPLY AND DEMAND 4

teenage employment, and the category lost the most engagement due to minimum wage laws.

This is because teens were the most likely to operate for minimum wages (Grossbard, 2002).

Research on the minimum wage has sought to highlight some of the variables operating in

labor markets. They represent complicated issues compared to the basic arguments regarding

demand and supply. First, not all labor is created equal. Mobility is the major difference and such

is linked to labor motility. Another issue in the current world is that jobs can be outsourced, both to

technology and other nations. Essentially, the supply of jobs is ascertained by forces rather than the

cost of labor. Lack of minimum wage in the United States, the cost of living will dictate that

individuals earn a specific amount. Labor is not produced in line with economic evaluation in a

similar manner of rental housing (Cornwall & Cornwall, 2002). Even if they were, labor is not

totally mobile as immigration between nations being controlled and thus high transaction expenses

are linked with global labor movement. Minimum wages are known to reduce employment.

Corporations employ fewer individuals in case of higher wages since the higher variable expenses

decline the contribution to fixed costs for the firm. In case the population maintained stability, a

high number of people would be attracted to the workforce but will confront fewer vacancies.

Raising the minimum wage should diminish the number of jobs in any economy.

Otherwise, the enhanced cost will be shifted to consumers, who will have disposable funds while

reducing consumption as an aftereffect. This is not the manner in which labor markets operate.

There is substantial controversy with the notion that there are fewer vacancies in society due to

minimum wage (Grossbard, 2015). Apparently, a minimum salary brings new demand for jobs as

more individuals are drawn to the labor force by the pledge of making adequate money to use.

Fewer work positions on the other hand will be available since the minimum wage renders

numerous jobs uneconomical.

SUPPLY AND DEMAND 5

References

Cornwall, J., & Cornwall, W. (2002). A demand and supply analysis of productivity growth.

Structural Change and Economic Dynamics, 13(2), 203-229.

Grossbard, S. (2015). The marriage motive: A price theory of marriage. New York: Springer.

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