Name: Tutor: Course: Date: University: Supply and Demand: How they Determine Commodities’ Prices The price of a commodity has a very high dependence upon that commodity’s demand and supply. This is a study set out to determine the relationship of a commodity’s price with demand and supply in focus…
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Thus, reflecting the direct relationship existing between the quantity of a commodity supplied and its price. Taking an example of HIV vaccine drugs and making assumptions that the prices of the drug will not be controlled nor affected by any other thing, apart from prices then this would be presented in a graph. This is as illustrated by the figure below; Fig 1: The relationship between price and quantity supplied of HIV drugs Price of HIV drugs (in USD) Supply curve 0 quantities supplied of HIV drugs (in packets) (Hoag Arleen J and Hoag John H, 2006 p74) On the other hand, the law of demand says that the higher the level of price of a commodity the lesser will be the demanded quantity of the same commodity if other things remain constant. Therefore, the only approach to triggering bigger quantities of a commodity’s demand by consumers is by reducing the prices of that commodity. To show the law of demand works and to understand the reverse relationship between quantities demanded of a commodity and its prices the graph below will be used. (Note that the same example of HIV drugs will be used but this time round it will be quantity demanded, other things remaining constant) Fig 2: The relationship between price and quantity supplied of HIV drugs Price of HIV drugs (in USD) Demand curve 0 quantities demanded of HIV drugs (in packets) (Depken, 2005 p7) The system where prices of a good are determined by supply and demand forces is referred to as a market economy. The reason why it is called a market economy is because the forces of the market which in other words are the market mechanism towards determining the prices of a good are allowed to operate so as to reach the price where the market will be at equilibrium. Societies in entirety usually make economic choices or decisions. At any given moment in time, the society needs to choose what is to be produced, how the same should be produced and who is allowed to consume the commodity. As far as conventional economics is concerned, the market via demand and supply provides answers to the mentioned questions. The prices of any given commodity, under conditions of a competitive market, are determined by the market. In other words, the market is formed by the entire group of consumers in one hand and the whole group of producers in the other. Therefore, the price is the major determinant of what is to constitute production and which consumer is to afford that commodity. Prices motivate both producers as well as consumers. If prices are high, then this is a call for producers to produce more and reap the benefits, but there will be less consumption of the same commodity due to very high prices. The opposite is where prices are lower and this motivates consumers to consume more and producers to produce lesser amounts of the commodity in question. These two incentives ensure that prices are pushed to balance both supply and demand. That is, supply (production) and demand (consumption). Equilibrium is where the quantity demanded is equal to the quantity supplied. Thus, the prices of a commodity are equal at this point. Using the previous graphs, equilibrium can be illustrated as follows: Fig 3: Market equilibrium of HIV drugs Price of HIV drugs (in USD) Demand curve supply curve Point of market equilibrium 0 quantities demanded of HIV drugs (in packets) (kr.mnsu.edu, 2011) Simply, markets exist only in a situation where
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“Supply and Demand: How They Determine Commodities' Prices Essay”, n.d. https://studentshare.org/macro-microeconomics/1432560-use-the-supply-and-demand-model-to-explain-how-a.
Dr. Mukund further elaborates that a change in the equilibrium of supply and demand of money often results to a drastic change in the balance between supply and demand of commodities. Within the same field of economics, the supplier and consumer are vital in the equilibrium of supply and demand of both money and commodities (Mahajan Mukund 23).
Various concepts are used in economics, them being; goods and services, firms, productions, supply and demand. Consumers’ needs and wants influence how goods and services are produced by firms, distributed by retailers and wholesalers, and the general consumption of the products themselves.
Price is a key determinant in the product quantity for supply. Supply is usually monitored by a specific graph drawn based on a supply schedule. The Supply schedule comprises of price listed against quantities supplied and the graph is referred to as a supply curve as shown in Figure 1.
Accordingly, the following analysis will present an argument for the way in which supply and demand is fundamentally shifted within the student beverage industry at the moment in time in which the risk of salmonella outbreak is noted. Whereas it may seem as counterintuitive that the risk of changes to supply and demand within something on the inelastic market may take place, it should not be understood that the food and beverage industry is inelastic.
The basic cost concepts were easy to understand, but I did try the exercises related to marginal costs and to diminishing returns, which were harder to understand and apply. The exercises were useful in clarifying and applying these concepts.
In simple words, market equilibrium is related to demand and supply. In order to understand the equilibrium situation in detail, let's first look at the meaning of the terms, demand and supply.
Demand, simply, is a schedule or curve that shows the various amounts of a product that consumers are willing and able to buy at each of a series of possible prices during a specified period of time.
For instance, economics may be seen in action in the field of sports like baseball, which after all is a big business.
This paper discusses how the basic economic principles operate within the framework of professional baseball. It tackles how prevailing conditions, such as rising ticket prices, skyrocketing salaries of players and competitive balances among teams, have an impact on the supply and demand concepts.
Microeconomics is the smaller scope of economics that deals with specific focus on decision making factors that entities consider at the individual or firm levels. Basic economic theories are developed at the microeconomic level, such as the theories of
that during the course of making the various amounts of homogeneous goods available in the marketplace, there will be significant effects with regards to the prices of the commodities. The reason being the existence of a variety of suppliers and manufacturers, who are supplying
elasticity helps policy makers and businesses to examine the possible market impact when there is an adjustment in the consumer purchasing behaviors. It should be noted that, if a small price change is accompanied by a big change in the amount of quantity demanded then the
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