Equilibrium price is the price where the quantity of goods supplied is similar to the quantity of the demanded goods (Thomas & Maurice, 201). In detail, when plotted on a graph, equilibrium is the point at which the demand curve and the supply curve intersect. Simultaneously, equilibrium quantity is where quantity demanded is similar to the quantity supplied. If the market dynamics change and the price fall below the equilibrium level, the quantity demanded will be much higher than the quantity supplied. There are two possible outcomes, a shortage will occur, or there will be excess demand for the product.
QUESTION: 1. WHY FIRM ARE INTEREST TO KNOW THE PRICE ELASTICITY OF DEMAND AND CROSS ELASTICITY OF DEMAND OF ITS PRODUCT? Price Elasticity of Demand. The price elasticity of demand is to measure the responsiveness of the quantity demanded of a good to a change in price. The degree responds of quantity demanded a change in price can vary considerably.
Both scenarios have major drawbacks, with scenario 1 the price increase would decrease consumption. Scenario two would increase consumption and creates a shortage. Scenario 1 creates a surplus and inventory cost. Encourages market entry with profit incentives. Figure 1 below illustrates the surplus and the
Scarcity When we go deep into the concepts of Economics, we understand that scarcity plays a major role in supporting other concepts like supply and demand. Production of goods occurs on the basis of the demands of the consumers. The sources of production are limited but human wants are unlimited. When people demand a particular product out of a raw material, producers produces maximum quantity for the sale of the same. When the quantity increases, the prices go down and the producers turn to some other product of the same raw material for making money.
Demand elasticity is the responsiveness of the outside economic factors for the demand of the goods and services. Mainly there are three demand elasticities; 1) Price elasticity of demand Responsiveness of price variation a considered good or service for the variation of demand 2) Cross Price elasticity of demand Responsiveness of price variation another good or service for the variation of demand 3) Income elasticity of demand Responsiveness of Consumer’s income for the variation of demand Generally demand for a specific good or service will fluctuate in different percentages corresponding to the fluctuation of external factor (elasticity factor). If the quantity demand variation is greater than the elasticity factor variation that
2.3.1 Market Related Factors Delivery lead-time requirements which are set by the market restricts how far backwards can the CODP be taken. Product demand volatility which indicates how much fusible is it to take the product on stock or manufacture it after the customer orders it. If the market is less volatile which means there can be a forecast about the market and it will be possible to take on stock. But if the market is highly volatile then it won’t be possible to make much accurate forecast and resulting into a make to order process. Product volume is related to demand volatility of the product.
3. Demand Demand has been defined as the amount of a particular good or service that the consumer will want and be able to purchase at a given price. The demand curve is usually delineated as a sloping downward from left to the right because price and quantity demanded are inversely related. As an example, the lower the price of sorbet, the higher the demand or number of
1.0 Introduction Time value of money is middle or main to the concept of finance. It recognizes the value of money is different at different points of time. Since money can be put to productive use, its values is different depending upon when it is received or paid. In simpler terms, the value of a certain amount of money today is more valuable than its value tomorrow. It is not because of uncertainty involved with time but purely an account of timing.
A market is a place where goods are exchanged. There are two major laws that are used in trade, the law of supply and the law of demand. A market comprises of producers and consumers who affect the prices of goods and services. Markets affect the process of production, distribution and consumption in the following ways: When the markets fetch a high price for a certain type of product, then its rate of production will increase. This gives a relationship between supply and quantity.
FATORS OF PRODUCTION DEFINTION: Factors of production is defined as “what people use to produce goods and services”. The recognized factors of production are land, labour, capital, and enterprise. IMPORTANCE: The concept of the factor of production is of great importance in modern economic analysis. It is used in the theory of production in which the various combinations of factors of production help in producing output when a firm operates under increasing or decreasing costs in the short run, and when the returns to scale increase or decrease in the long run. Further we can also know, how can the least cost combination of factors be obtained by a firm.