The table below shows information on aggregate supply, aggregate demand and the price level for the imaginary country of Xurbia. Price Level AD AS 110 700 600 120 690 640 130 680 680 140 670 720 150 660 740 160 650 760 170 640 770  Plot the AD/AS diagram from the data shown (Don't have to show graph but do draw it to help you answer the questions). a.  Identify the equilibrium. b.  Imagine that as a result of a government tax cut, aggregate demand becomes higher by 50 at every price level. Identify the new equilibrium. c.  How will the new equilibrium alter output? How will it alter the price level? What do you think will happen to employment?

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Demand and Supply

The concept of demand and supply is important for various factors. One of them is studying and evaluating the condition of an economy within a certain period. The analysis or evaluation of the demand-side factors is important for the suppliers to understand the consumer or individual behaviour. The evaluation of supply-side factors is important for the consumer or individuals to understand that what kind of combination of an economic good or what kind of economic good and services he or she should consume to maximise his utility and minimise the cost. Therefore, in microeconomics, both of these concepts are extremely important to have an idea that what exactly is going on in the economy.