discussions

The Law of Demand

The “Law of Demand” says that output increases when price falls, all else equal. That is, demand curves slope downward. But sometimes we see the price of a good rise when output increases. For example, lithium is used in rechargeable batteries for computers, phones, other electronic goods, and even certain cars. Demand for lithium was low as recently as the early 2000s. Since then, both the price of lithium and the production of lithium have more than doubled.

Start your discussion post by responding to this question:

What could explain the simultaneous increases in the price of lithium and the production of lithium? Use supply and demand curves to explain your answer. (Hint: Price and equilibrium quantity have both increased. Would a shift in the demand curve or a shift in the supply curve lead to this result?)

Looking Closely at Cost and Competition

Watch this video (Revenues, Profits, and Price) to help you prepare for this week’s discussion:

Reply to these prompts using the company for which you currently work, a business with which you’re familiar, or the dream business you want to start:

• What are some key fixed and variable costs for this business? Remember, fixed costs do not change when output changes. That is, fixed costs remain even if the company is producing nothing. Variable costs increase as output increases.