Supply and Demand

Supply and Demand is an economic model that helps create a competitive market place. It consist of a set of four basic laws.

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Supply and Demand

What are five factors that influence demand?

The five factors that influence demand are:

  1. income
  2. prices of related goods
  3. tastes
  4. expectations
  5. number of buyers

More information for factors that influence demand:

1. Number of consumers (naturally, more consumers means more demand)

2. Income & normal goods (as income increases, demand for these goods increases)

3. Income & inferior goods (as income increases, demand for these goods decreases)

4. Preferences (obviously, if they prefer to buy it their demand will increase)

5. Price of a substitute (if the price of a substitute good increases, demand for the original good will increase)

6. Expectation of future prices and income.

7. Government policies. e.g. ban pornography. This leans more towards supply restriction rather than demand.

8. Substitutes (Greater the number of substitutes and the attractiveness of their price, the smaller will be the demand for the good)

9. Complement goods (increase demand for cars would raise demand for petrol)

10 fashion (if item is currently popular in the market it will get more buyers and so it would be a high demand item

11. weather ( a winter cloth would be in greater demand in winter as compared to summer)

12. wars (demand of certain goods can be influenced in wars compared to peace situation

13. traditional and religious festivals and events can influence the demand of certain goods, like Christmas tree is in higher demand in the month of December

14. number of sellers also impact demand by influencing the price of certain goods.

Supply and Demand

How will supply and demand be affected under pure competition?

If you have too little supply or too much demand for your company, then your competitor will win because then the customers will think that you're a sucky company.

Supply and Demand

What happens when demand exceeds supply?

The price usually goes up. If lots of people want something, you have to pay more to get it.

Supply and Demand

How does the law of supply and demand help determine the price on an item?

its quite simple really, when a resource is scarce and there is a reflective demand for the item prices will rise as consumers will pay more for this rare item. On the other hand if the resource is plentiful and easily attainable consumers will look for the best (lowest) prices or not be willing to pay much at all if the item can be found everywhere.

Supply and Demand

What is meant by the terms supply and demand?

ability to pay & willing to buy.

Supply and Demand

When a firm makes a profit by producing enough goods to meet demand without having leftover supply at what point is it?

When a firm makes a profit by producing enough goods to meet demand without having leftover supply the point of profit is where marginal revenue equals marginal cost.

Supply and Demand

What is a real life example of supply and demand?

The most predominant examples are the automotive and petroleum industries.

Supply and Demand

What is Supply and demand economics?

In economics, supply and demand describes market relations between prospective sellers and buyers of a good. The supply and demand model determines price and quantity sold in a market. This model is fundamental in microeconomic analysis, and is used as a foundation for other economic models and theories. It predicts that in a competitive market, price will function to equalize the quantity demanded by consumers, and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity. The model incorporates other factors changing equilibrium as a shift of demand and/or supply.

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Supply and Demand

What kind of market demand and supply information would be useful to you in deciding upon a business strategy?

A customer filled form of the following fields will be of great use. * Do you need product urgently? * How many times you visited our store? * Was the proper information provided to you? * Were you attended properly? * Can you afford to pay more for a quick delivery? * Have you ever used our product? * How do you know about our product?

Supply and Demand

Explain how supply and demand interact to determine equilibrium price and output?

The answer is from an economics point of view. You might need to draw a diagram to understand the question better. Let's say that the initial equilibrium price and quantity is stable, where the demand and supply curves intersect each other. Using the market for console games for relevance, let's say the price of Play Station 3 is initially priced at USD 3.00. (it's only an example, as I have no idea how much it costs). At this price, we can say that that is the equilibrium price of the PS3, and the equilibrium quantity is 1000 units. However the equilibrium price and quantity can change depending on changes in the supply and demand in the market, hence the question is asking how the interaction between demand and supply can determine the price and output. Let assume that the demand for PS3 increases, which can happen in real life during holiday season or before Christmas. If this happens, in a graph, the demand graph will shift out. An increase in the demand while the supply remains the same, means there is excess demand of PS3 in the market. This means there are a lot of people who want to buy the PS3 but there are too little in the market or insufficient amount supplied. If this happens, the price will increase. (this is very normal in economics, when there exists excess demand the value of the good increases). The increase in the price, will thus form the new equilibrium price and quantity. We can say that the excess demand caused the price of PS3 to increase, and only a few can purchase it. This is one example of the interaction of demand and supply to determine the equilibrium price and quantity. At times, it's not only the demand that can affect the price and quantity. There are times where the supply can affect the price of a good. If excess demand causes the price to increase, excess supply, meaning a surplus of goods in the market. will mean the price will eventually fall. What you need to understand is the use of demand and supply to determine the price and quantity is a model. This demand and supply model is used to basicly understand the relationship between price and quantity and factors that can affect it.

Supply and Demand

Income Elasticity of Supply and Demand?

Response of quantity demanded and supplied due to a change in consumer disposable income.

Supply and Demand

Relationship and interaction of supply and demand in the economy?

supply and demand and the economy system is interrelated to each other. It like man and his heart. If heart bits stops man die and in economy if demand and supply function well in a nation then definitely the economic system goes up, it doesn't matter with what goes up and what goes down in society. i mean by supply and demand of course it effects the whole economy system.

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Supply and Demand

What is the difference between price elasticity and cross elasticity of demand?

price elasticity of demand measures the responsiveness of quantity demanded when there is a change in price of the particular good you are examining. Cross elasticity of demand measures the responsiveness of quantity demanded when there is a change in price of OTHER goods.PED is always a negative value because the quantity demanded and price have an inverse relationship, i.e when price increases, quantity demanded will decrease and vice versa.

Whereas CED can be either positive or negative. It all depends on the nature of the goods you're examining. Two types of goods that play an influencial role in determining CED of a good is Complementary goods and Substitute goods. Take for example, CED of substitute goods are always positve. This is because the quantity demanded for the substitute goods has a positive relationship with the price of the initial good, i.e when price of initial good drops, the quantity demanded for substitute goods will drop as well. This is because consumers will always opt for the cheaper alternative, which in this case is the initial good, thus quantity demanded for its substitutes will decrease.

Supply and Demand

Where does all the buying selling supply and demand for a product take place?


Supply and Demand

What factors affect the labor supply and demand?

Oh that was not even funny;-)

The two determining factors in this question are, whither or not you want someone else to do your homework for you and you get the Bravo Zulu for it or not?

Either way the answer to your question is in your text for that weeks assignment. Just go to it and read it. Common sense would tell you that supply and demand are buddies in the Capitalistic system. The more you have of something the less it will be worth without a same or above level of demand. That is all of the help I will give for this answer, Next!

Supply and Demand

How does the incidence of a tax use the price elasticity of supply and demand?

If the demand is perfectly elastic in prices (that is, demand falls to zero if the price for consumers is raised even the slightest bit), then the entire tax incidence falls on the producer since the producer would rather face the entire tax burden than lose all his consumers. And if the demand is perfectly inelastic (doesn't change with change in commodity price) then the entire burden falls on the consumers.

So higher the price elasticity of demand, higher would be the share of taxes borne by the producer. And higher the price elasticity of supply, lower the share borne by the producer, by similar logic.

Supply and Demand

When supply and demand for a product increase simultaneously?

We cannot predict the market clearing price, but know that the equilibrium will increase.

Supply and Demand

What are the economic principles involved in supply and demand?

Any potential producer of a product or a service needs first to determine the need for such goods. This is usually done through companies that do research by contacting either the public through surveys, or to specific companies that might require those services. They also inform you as to what other people or companies are also providing those services or goods, and if there is any available room in the market for a new comer. This then determines demand. This also determines the available supply to fill the demands. It is much like water always attempting to find equalibrium.

Supply and Demand

How do supply and demand affect prices in a free enterprise system?

In a free enterprise system, when supply is low and demand is high, prices are higher, but when supply is high and and demand is low, prices are lower.

Supply and Demand

How does supply and demand affect consumers?

Supply and demand are vital to consumers. If a product is in high demand the supply has to go up which can increase prices because of the demand. Prices end up going up because more has to be shipped and it would have to get to the location of demand in a certain time.

Supply and Demand

Markets explained on the basis of supply and demand?

Assume many buyers and many sellers of a standardized product

Supply and Demand

How does Supply and Demand affect prices?

If supply is greater then the demand then the price is lower but if the demand is higher then the supply then the price is higher due to rarity. :)

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Supply and Demand

How is the price elasticity of supply calculated?

change in quantity supplied quantity supplied --------------------------- x ----------------- price change in price

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Supply and Demand

What is a trade-off in economics?

an alternative that we sacrifice when we make a decision

Supply and Demand

Do the laws of supply and demand apply to the gasoline market?



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