Chapter 3, Problem 12P

To determine

Demand and supply in the given situations
(a) Use of costly wood in making handmade acoustic guitar.
(b) Foreign producer reengineers the guitar-making process.
(c) Music featuring handmade acoustic guitars makes a comeback.
(d) The country faces recession and the average income falls sharply.

Concept Introduction

Demand: The demand of a product or service in the market is derived by the willingness to purchase and ability of the consumers to pay for the purchase.

Supply: The supply of a product or service means making available a specific product or service to the consumers at a specific price.

Equilibrium Price: The equilibrium price is the market price at which the quantity demanded by the consumers equals the quantity supplied by the producers.

Equilibrium Quantity: The equilibrium quantity is that quantity where the demand and supply of a product or service is equal.