Different Products and Factors which Affect their Demand and Supply - Assignment Example

List of different products and factors which affect their Demand and Supply Q1) List and elaborate on the factors that will be affecting thedemand for the following products in the next several years. Do you think these factors will cause the demand to increase or decrease Ans.) There are various factors which affect the demand for a product. The main factor which affects the demand for a product is its 'Price'. The Law of Demand states that : As price of a good increases, its quantity demanded decreases and vice versa. However, any change in the price of a commodity will not shifts its demand curve, any price changes will result in an extraction or contraction of demand i.e. movement on the same demand curve, An increase in price will result into a lower quantity demanded that will be represented by a contraction (along the same curve) of demand. Similarly, any decrease in the price of a commodity will increase its quantity demanded that will result into an extension of demand i.e. movement along the same curve towards a higher level of quantity demanded. Any other factors other than price which affects the demand for a product will result into a change in its demand at every level; hence the whole demand curve will shift from its original position and will operate on a new demand curve formed on the basis and magnitude of the change. Some factors which affect the demand for a product are changes in the income level of a person, changes in the distribution of income, advertising and marketing of the product, consumer's taste, fashion or trend, credit facilities associated with the product, price of substitute goods and complementary goods etc. Any changes is population are also considered to be a factor which influence the demand, however, it is considered to be a long-term factor, any changes in population usually occur over a large period of time. LIST OF PRODUCTS AND FACTORS WHICH INFLUENCE THEIR DEMAND Convenience Foods (sold in foods shops and supermarkets) The market for convenience foods is expanding rapidly even though there are various programs and efforts directed to inform the people about its adverse effects on human health. Some people believe that it contains lesser amount of nutrients and higher amount of fats, preservatives, taste enhancers etc. Despite the concerns associated with it the demand for convenience food is on the rise as the quality or taste of the food and female employment has increased. More people are attracted towards these nearly ready-to-eat meals as they feel it saves time and is more convenient than usual cooking. The market for convenience foods is expected to expand further which means there will be further increases in its demand, this could be due to different factors such as change in taste, fashion, lower price, higher quality etc. The price of a good always plays an important role in determining what quantity will be demanded by the consumers. The price of convenience foods is expected to decrease as newer and efficient factors and methods of production are been used. This will result into an extension in its demand, i.e. its quantity demanded will increase and it will remain on the same demand curve. Any increase in the disposable income of the consumers will increase the demand (shift the demand curve to the right) and vice versa. If income becomes unevenly distributed, the demand for luxury goods is expected to increase whereas demand for convenience foods and other basic necessities in that case will decrease. If the price of substitutes for convenience food decreases, demand for convenience food is expected to decrease as well and vice versa. Similarly, if the price of a complementary good decrease, the demand for convenience food will increase (the demand curve will shift to the right). Convenience food are already marketed heavily in some areas. Advertising can be a useful tool to compel the buyers to buy a product. Good advertising and successful marketing strategies can increase the demand for convenience foods. The trend to use more convenience food has evolved and is expanding rapidly as more and more people switch to convenience foods. People prefer convenience foods over other items on the account of better taste, higher quality and its convenience. Changes in population are usually long term, an increase in the population will also increase the demand for convenience foods. Products purchased on the Internet The products purchased through the Internet are gaining popularity and people are shifting towards this trend of shopping through the Internet without going through all the hassle of physically visiting the supermarket or malls. The demand for such products is expected to increase over the few years, more people will become aware and increased facilities (especially in third world countries) will stimulate demand. The price for products purchased on the Internet is expected to decrease (due to technological and other factors), this will cause the quantity demanded for such products to increase i.e. it will result into an extension in demand. As the disposable income of the consumers increase, the demand for products purchased through the Internet will also increase and vice versa. As people will have more to spend they will purchase more. If income becomes more unevenly distributed the demand for luxury goods will increase and the demand for basic goods will decrease. If the price of substitutes for products purchased on the Internet decreases, the demand for convenience food is expected to decrease as well and vice versa. Similarly, if the price of a complementary good decrease, the demand for products purchased on the Internet will increase (the demand curve will shift to the right). Products on the Internet are already marketed heavily in some areas. Advertising can be a useful tool to compel the buyers to buy a product. Good advertising and successful marketing strategies can increase the demand for products purchased on the Internet, shifting its demand curve to the right. : An increasing number of people prefer to shop through the Internet without going through the hassle of physically visiting the place, going through traffic jams, parking problems etc. This change in consumer's taste and fashion will increase the demand curve for products purchased on the Internet, shifting their demand curve to the right. This type of changes are usually long term, an increase in the population will also increase the demand for products purchased on the Internet. Fax Machines The demand for fax machines has been overshadowed by the use of Internet and the facilities it provides. People have started to rely on email, videoconferencing and other such methods to communicate with each other. The price of fax machines is expected to decrease over the next few years. This will result into an extension in its demand, i.e. its quantity demanded will increase and it will remain on the same demand curve. However, the magnitude of the change in quantity demanded will be much lower because of the increased preference of customers to use the Internet for communication purposes. Factors other than price will also affect the demand for fax machines. These include changes in disposable income of consumers, changes in the distribution of income, advertising and marketing, changes in taste and fashion, the credit facilities available, changes in the price and/or demand for substitutes and complementary goods. An increase in such factors will increase the demand for fax machines i.e. shift its demand curve to the right. Films and Cameras The demand for films and cameras has experienced a downfall with the innovation of mobile phones with cameras, cameras with built-in memory or memory cards etc. Films and cameras were jointly demanded, that is, they are close complements of each other. A decrease in the price of cameras will increase the quantity demanded for cameras (extension in demand) and increase the demand for films (shifting its demand curve to the right) and vice versa. However, as mentioned before the relationship between films and cameras has not been able to remain as strong as it was before because of the introduction of memory cards and built-in memory options in cameras. The price of films and cameras is expected to decrease over the next few years. This will result into an extension in its demand, i.e. its quantity demanded will increase and it will remain on the same demand curve. However, the magnitude of the change in quantity demanded may be lowered because of the increased use of mobile phones with cameras and other such devices. Factors other than price will also affect the demand for films and cameras. These include changes in disposable income of consumers, changes in the distribution of income, advertising and marketing, changes in taste and fashion, the credit facilities available, changes in the price and/or demand for substitutes and complementary goods. An increase in such factors will increase the demand for films and cameras i.e. shift its demand curve to the right. Video rented from retail outlets The market for video rented from retail outlets has greatly been affected by the use of Internet. Many people prefer to download the content they want from the Internet rather than going to the retail store and renting out a video. With newer and improved facilities provided by the Internet, video rented from retail outlets will have lower scope in the future. The price of video rented out from retail stores is expected to decrease over the next few years. This will result into an extension in its demand, i.e. its quantity demanded will increase and it will remain on the same demand curve. However, the magnitude of the change in quantity demanded may be lowered because of the increased use of Internet to download different types of media. Factors other than price will also affect the demand for video rented from retail outlets. These include changes in disposable income of consumers, changes in the distribution of income, advertising and marketing, changes in taste and fashion, the credit facilities available, changes in the price and/or demand for substitutes and complementary goods. An increase in such factors will increase the demand for films and cameras i.e. shift its demand curve to the right and vice versa. Pay-per-view television programming Pay-per-view television programming has been able to attract customers. It can become expensive for some customers due to the high prices associated with pay-per-views. Pay-per-view programming can acquire more customers with a decrease in its prices. The price of Pay-per-view television programming may decrease over the next few years due to increased competition and other factors. This will result into an extension in its demand, i.e. its quantity demanded will increase and it will remain on the same demand curve. Factors other than price also affect the demand for Pay-per-view television programming. These include changes in disposable income of consumers, changes in the distribution of income, advertising and marketing, changes in taste and fashion, the credit facilities available, changes in the price and/or demand for substitutes and complementary goods. An increase in such factors will increase the demand for films and cameras i.e. shift its demand curve to the right and vice versa. Q2) List and elaborate on the factors that will be affecting the supply for the following products in the next several years. Do you think these factors will cause the supply to increase or decrease Ans.) LIST OF PRODUCTS AND FACTORS WHICH INFLUENCE THEIR SUPPLY The supply of a product depends upon various factors such as technological advances and innovations, changes in the prices of raw materials or other factors of production, changes in the price of other goods, taxation imposed, subsidies provided, changes in the number of producers in the market etc. Crude Oil Crude oil is a key product used in various industries in the production of many goods and services. Any changes in the prices of such key materials causes a chain effect and affects the prices of many goods and services associated with its use. Any changes in the price of a good will cause an extension or contraction in its supply i.e. movement along the same supply curve. An increase in the price of a good will result into a higher quantity supplied (as producers find in more profitable and attractive), this will be shown by an extension in supply. Similarly, if the price of good decreases, producers find it less profitable and the quantity supplied will decrease, shown by a contraction in supply. Any changes in the factors which determine the supply of a product such as decrease in the prices of factors of production, advances in technology, increase in the prices of other goods, lower taxation, more subsidies, higher number or producers, weather conditions which favor this product etc. will increase the supply of the product, that is, it will shift the supply curve to the right. Computer memory chips Computer memory chips and other technological devices have been experiencing a boom and are expected to continue to do so in the future. Producers find the manufacturing of computer chips as profitable, more and more producers have entered the industry, this has greatly increased the competition and also increased the supply of computer chips into the market to cater the increased demand of consumers. Any changes in the price of a good will cause an extension or contraction in its supply i.e. movement along the same supply curve. An increase in the price of a good will result into a higher quantity supplied (as producers find in more profitable and attractive), this will be shown by an extension in supply. Similarly, if the price of good decreases, producers find it less profitable and the quantity supplied will decrease, shown by a contraction in supply. Any changes in the factors which determine the supply of a product such as decrease in the prices of factors of production, advances in technology, increase in the prices of other goods, lower taxation, more subsidies, higher number or producers, weather conditions which favor this product etc. will increase the supply of the product, that is, it will shift the supply curve to the right. Hotel rooms The supply of hotel rooms is greatly dependent on the demand of the rooms. In tourist spots, the demand and supply of hotel rooms is determined by the weather conditions and the number of tourists in the season. In the off-season, the rooms have a lower price due to the lesser demand and lower number of customers. Any changes in the price of a good will cause an extension or contraction in its supply i.e. movement along the same supply curve. An increase in the price of a good will result into a higher quantity supplied (as producers find in more profitable and attractive), this will be shown by an extension in supply. Similarly, if the price of good decreases, producers find it less profitable and the quantity supplied will decrease, shown by a contraction in supply. Any changes in the factors which determine the supply of a product such as decrease in the prices of factors of production, weather conditions, advances in technology, increase in the prices of other goods, lower taxation, more subsidies, higher number or producers, weather conditions which favor this product etc. will increase the supply of the product, that is, it will shift the supply curve to the right. Fast food outlets in emerging markets Fast food outlets have become quite popular especially among the younger generation. Even though multiple health awareness programs have been initiated to inform the people about the adverse effects of fast food, its demand has been on an increase. This attracted more and more producers to enter the market and hence increase the supply of such outlets. Any changes in the price of a good will cause an extension or contraction in its supply i.e. movement along the same supply curve. An increase in the price of a good will result into a higher quantity supplied (as producers find in more profitable and attractive), this will be shown by an extension in supply. Similarly, if the price of good decreases, producers find it less profitable and the quantity supplied will decrease, shown by a contraction in supply. Any changes in the factors which determine the supply of a product such as decrease in the prices of factors of production, advances in technology, increase in the prices of other goods, lower taxation, more subsidies, higher number or producers, weather conditions which favor this product etc. will increase the supply of the product, that is, it will shift the supply curve to the right. Credit card issued in financial institutions The use of credit cards and other such credit facilities has received great response from its customers. The provision of such facilities has shifted the trend of carrying cash and more customers now prefer to use credit cards for purchasing and other purposes. Any changes in the price of a good will cause an extension or contraction in its supply i.e. movement along the same supply curve. An increase in the price of a good will result into a higher quantity supplied (as producers find in more profitable and attractive), this will be shown by an extension in supply. Similarly, if the price of good decreases, producers find it less profitable and the quantity supplied will decrease, shown by a contraction in supply. Any changes in the factors which determine the supply of a product such as decrease in the prices of factors of production, advances in technology, increase in the prices of other goods, lower taxation, more subsidies, higher number or producers, weather conditions which favor this product etc. will increase the supply of the product, that is, it will shift the supply curve to the right. Laptop computers The supply of laptop computer has increases sharply; manufacturers find it more profitable as the demand for laptop computers has increased tenfold. This has increased the supply of laptop computers in the market and increase the competition in the industry. Any changes in the price of a good will cause an extension or contraction in its supply i.e. movement along the same supply curve. An increase in the price of a good will result into a higher quantity supplied (as producers find in more profitable and attractive), this will be shown by an extension in supply. Similarly, if the price of good decreases, producers find it less profitable and the quantity supplied will decrease, shown by a contraction in supply. Any changes in the factors which determine the supply of a product such as decrease in the prices of factors of production, advances in technology, increase in the prices of other goods, lower taxation, more subsidies, higher number or producers, weather conditions which favor this product etc. will increase the supply of the product, that is, it will shift the supply curve to the right. BIBLIOGRAPHY 1. Abel, Andrew B. & Bernanke, Ben S. 2003, Macroeconomics, Princeton, Princeton University Press. 2. Bamford, Colin et al. 2002, Economics, Cambridge, Cambridge University Press. 3. Jenkinson, Tim 2000, Readings in Microeconomics, Oxford, Oxford University Press. 4. Jones, Philip & Cullis, John 2001, Microeconomics, Oxford, Oxford University Press. 5. Lipsey, Richard G & Chrystal, K. Alec 1999, Principles of Economics, New York, Oxford University Press. 6. Moynihan, Dan & Titley, Brian 1993, Economics: A Complete Course, 2nd edition, London, Oxford University Press. 7. Rubenstein, Ariel 2006, Lecture Notes in Microeconomic Theory: The Economic Agent, Princeton, Princeton University Press. 8. Samuelson, Paul A & Nordhaus, William D. 2001, Economics, New York, McGraw Hill. 9. Sloman, John & Hinde Kevin, 2007, Economics for Business, Harlow, FT Prentice Hall. 10. Sloman, John & Sutcliffe, Mark 2004, Economics for Business, 3rd edition, Harlow, Financial Times/ Prentice Hall. 11. Stanlake, GF & Grant, SJ 2000, Introductory Economics, Harlow, Longman. Websites: 12. All Experts 2007, All Experts, 15th December 2007, http://en.allexperts.com/e/s/su/supply_and_demand Read More