Contact Us
Sign In / Sign Up for FREE
Go to advanced search...

Supply and Demand: how They Determine Commodities' Prices - Essay Example

Comments (0) Cite this document
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…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93.9% of users find it useful
Supply and Demand: how They Determine Commodities Prices
Read TextPreview

Extract of sample "Supply and Demand: how They Determine Commodities' Prices"

Download file to see previous pages 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) (, 2011) Simply, markets exist only in a situation where ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Supply and Demand: how They Determine Commodities' Prices Essay”, n.d.)
Retrieved from
(Supply and Demand: How They Determine Commodities' Prices Essay)
“Supply and Demand: How They Determine Commodities' Prices Essay”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Supply and Demand: how They Determine Commodities' Prices

How Does Branding Affect Buyers Purchase Decision

The scope of the study covers all kinds of buyers with different behaviours making buying decisions with regard to different brands. There is also a detailed study of the Consumer Decision Process. There is a good enough introduction on consumer buying process besides an extended and detailed introduction on Branding and Marketing emphasizing the difference between the two and how the concepts are different from each and in what way there can be a delineation between the two. There is an explanation on the different stages of Consumer Buying Behaviour, namely Need Awareness, Information Search, Checking Options, Purchase Decision, and Post Purchase Behaviour. There is also a detailed explanation on Types of Consumer Buying Behavio...
44 Pages(11000 words)Research Paper

How Effective Are the Current Environment and Ethical/Social Policies of Tesco

 Tesco has been accused of indulging in unfair and monopolistic activities, unethical price of price undercutting thus creating a squeeze on the competition and the local farming community. The volumes of goods traded and retailed leave a large carbon footprint. However, Tesco has stood it is for quite some time now by creating and implementing policies for ethical and responsible for not only fending media accusations but also by stating, and implementing ethical and social policies.

According to Walley (2005), sustainable practices are best developed with an interplay of forces outside organizations like laws, regulations, and competition and organizational policies like governance, and social and ethical practic...
10 Pages(2500 words)Assignment

American Airlines: Supply Chain Nightmare

For this reason, it is necessary that all business sectors are carefully reviewed – as often as possible – for the appropriateness of their structure and their daily needs; managers may fail to evaluate with accuracy their firm’s needs, a fact that can cause the failure of plans applied on the relevant organization (Hardless, 2005). On the other hand, the needs of various organizational departments are different; the methods used for the improvement of a firm’s activities should be flexible taking into consideration the characteristics of the specific organizational sector, its strengths/ weaknesses but also its role in the development of the firm’s activities. Boeing is a firm with a long presence in...
15 Pages(3750 words)Case Study

How Does the US Media Effects Evolve in Singapores Current Media

Lewis and Slade (2000, p. 223) in their critical evaluation of the effects of media communication on the audience argue that media effect is achieved incongruent with social context. Their study recounts the experiment on the influence of television on identity in Singapore indicates that US social values and Singaporean values greatly differ from each other. The sharp differences in program content have a negative influence on the audience because Chinese raised Singaporeans value marriage, social values, and collectivism whereas US social culture involves career, family and the struggle to balance the two. Therefore the question of US media's influence to destabilize Singaporean national identity is limited. This view is emphasi...
6 Pages(1500 words)Assignment

How to Choose the Right Job

In a research that was conducted by the London School of Economics in 2005 – 2006, it has been seen that almost 61.6% of the students worked after graduation (LSE, 2008). According to Little (2007), the link between high education and employment is very high.

“Employability is a set of achievements – skills, understandings, and personal attributes – that make graduates more likely to gain employment and be successful in their chosen occupations, which benefits themselves, the workforce, the community, and the economy” (Little, 2007)

The research highlighted the strong points that are developed by students and the percentage of skills that are developed post-high education program...
6 Pages(1500 words)Research Paper

How Tomatoes Can Help Your Heart

Whether tomato is a fruit or vegetable? Well, this question can be answered in both ways. Botanically, tomato is a fruit but it is so frequently used as a culinary item all over the world, it is also considered as a vegetable. Long time back, the tomato was considered as fruit and helped the exporters to avoid taxation but 1893 the Supreme Court put an over this dispute by declaring that tomato was a vegetable and since that time onwards, tomatoes were taxed accordingly. Keeping in harmony with this tradition, till date tomatoes are served as entrée and very rarely as dessert. Apart from side dishes, wide array of main course dishes are also prepared from tomatoes and these dishes are regarded considered as lip-smacking cui...
6 Pages(1500 words)Case Study

Oil Prices by OPEC and Market Fundamentals

Market failure is defined as the inefficient allocation of resources by the market, the free market is considered to optimally prices and resources in the production of goods and services, and this is because the price and quantity produced are determined by market forces which include the demand and the supply. The control of prices by a firm or an organization in the market results in market failure, therefore OPEC leads to market failure due to its nature in the market.

OPEC was formed in 1960 by 5 oil-producing countries which include Venezuela, Saudi Arabia, Kuwait, Iran and Iraq, The aim of this organization was to unify petroleum-producing countries in order to realize fair and stable prices of oil .other oil-pro...
6 Pages(1500 words)Report

Amending the Constitution: How Hard It Is to Change

However, the purpose of our government is not subjective, and it is not unwritten or buried somewhere in the philosophical musings of a Greek theorist. The purpose of government, specifically our government, as stated by Thomas Jefferson in the Declaration of Independence, is “to secure these [natural] Rights, Governments are instituted among Men, deriving their just powers from the consent of the governed…” Our government exists to protect individual, negative rights that exist outside the common law. Whenever a force, whether in a society or from outside it, threatens the rights of citizens, it is the responsibility of their government to take action and protect them from violations. There are many forces that...
9 Pages(2250 words)Assignment

Emergency Economic Stabilization Act of 2008 and How It Has Impacted the Financial Markets

Though there were objections from various quarters about the huge amounts of tax payer’s money being used in the bailout of huge corporates, the Act has been successful in moving the downturn towards a flat point and now has started slowly moving towards a recovery stage. The various programs under the EESA 2008 have played a significant role in the financial sector, housing mortgage, and banking institutions to save the institutions from complete disaster.

The Emergency Economic Stabilization Act is a huge taxpayer bailout designed to rescue the financial sector. The amount of money to be used is around $700 billion or $2000 per American citizen (Public mark up). Emergency Economic Stabilization Act of 2008 is al...
10 Pages(2500 words)Research Paper

Relationship between Money Supply and Inflation in Saudi Arabia

Over the recent past, the effects of money supply, debt and inflation have become contentious issues for debate. Furthermore, frequent cautions concerning the risk of very large budgetary deficits aver that this would send up the upcoming state debt and capital rate as indicated by the rates (interests). As a nation, Saudi Arabia has a bi and enduring budgetary deficit over the past two decades and the government has been forced to go into the market so as to have loan access and to make up for the deficits. Given the impact of this on inflation and other economic variables, it's imperative and of great alarm for strategy architects (strategists) to understand how microeconomics has an effect on money supply, financial plan defici...
10 Pages(2500 words)Speech or Presentation
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Supply and Demand: how They Determine Commodities' Prices for FREE!

Contact Us