Due to it being the holiday season, many retailers are engaging in a “price war.” This means lowering their prices as much as they can to attract customers while still making a profit. When a producer lowers their prices the consumers will want to purchase more, according to the law of demand. The fact that attracting customers to your store means diverting them from another is what initiates the “war.” The fiercest competition right now is between Best Buy, Wal-Mart, Target, and the online shopping giant, Amazon.
This diagram (F1) is of a regular supply and demand chart. The supply curve increases because producers want to sell more of a product at a higher price, since it’s costing more to provide more products, while the demand curve goes down, due to decreased interest in a good when it costs more. The point where they come together on the chart is the equilibrium point, where the producer can make a decent profit, while the consumer can still reap a decent utility (satisfaction) out of the product.
This diagram (F2) portrays an increase in demand, or a shift to the right of the demand curve (from D to D1). This means that a consumer (a buyer of a good) is willing to pay more for a good due to an increased desire for that
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It has the same shift in the demand curve to the right as in the previous diagram (D1 to D2), but this diagram also has a shift to the right in the supply curve (S1 to S2). This supply shift is representative of a retailer lowering their prices. The diagram shows the decrease in price from where S1 and D2 would meet (S1 being normal supply prices and D2 being new holiday demand) to where D2 and S2 (D2 being the new holiday demand and S2 being the new lowered supply price) meet to create e2, or equilibrium 2. The new equilibrium shows more business at a slightly lower price. This however is not exactly the true