The supply can depend on how profitable a product is and the availability of raw materials and labour. Businesses usually supply more at higher prices and supply less at lower prices. Demand is how much a product or service is wanted and what price the customers are prepared to pay for it. Demand falls as prices rice and it rises when prices fall. There are several factors that influence the demand for goods or services.
Elasticity is a term that describes how much the demand or supply for a product or service changes in relation to that product’s price. Each product on the market today has a different level of elasticity. Products considered to be necessities by a majority of consumers are typically less affected by price changes, causing them to be less elastic. By contrast, if consumers do not consider a product to be essential, they are likely to buy less of it if the price is increased, making that product elastic. The two markets I choose to discuss are Airline Industry which will be characterized by an elastic demand and Pharmaceutical Companies (Insulin) which will be characterized by an inelastic demand.
The first one is cost of production- cause if the cost of any factor of production decreases, the quantity that producers are able to supply at a given price increases. Second is changes in government policy, as in government spending and taxation influence employment and household income, which dictates consumer spending and investment. Third one is changes in the numbers of producers increased demand to increased supply, decreased demand so it will decrease supply. There is also two terms you need to know about supply elasticity, one is if supply is elastic, a change in the price will cause a change in the number of items produced. The other is inelastic, a change in the price will not cause a change in the number of items produced.
A failure of the Central Bank to region in the MS also makes the demand- pull inflation worse. Next, cost -push or supply -side inflation. Under cost -push or supply -side inflation, it occurs when the price of input increase. If price increase, it will lead to decrease the ability of producer to generate output because their unit cost of production increase. The third cause is expectations of future prices.
Product availability is now overriding product price and image in today’s market. The customer wants to know whether he or she can have the product now or not, otherwise he or she will go ahead to buy another product of the same kind but produced by a competitor. The evidence sourced from across a wide range of markets suggest that the critical determinant of whether orders are won or lost and hence the basis for becoming a preferred supplier is customer service. Time has become a very important component in the competitive process. Customers in most markets want
Overproduction in America became a big problem due to technological and industrial advancements which left producers with too much supply, and not enough demand from consumers. Due to advancements in technology, production was at an all one high in America. Farmers were able to use new techniques, but began producing product too fast for it to be purchased. This overproduction left producers with too much product and a need to offload, so prices were driven down. As prices were driven down to the lowest point to create sales, this caused problems for the economy.
An increase in wages leads to a decline in supply of goods and services because labor is considered as a business cost. However, a reduction of labor costs also results in a decline in demand because the supply side creates the demand equation. The reason for this is that as costs of business are reduced by reducing the cost of labor, the result is that there are jobs lost and therefore there is less money on the demand side as well. Where there is a shortage of skills, high wages must be paid to ensure that workers are attracted. However, low skill jobs have many people who can work and therefore the result of this is low wages for such tasks (Gerhard, 2009).
An increase in the number of producers will cause an increase in supply. Expansion in capacity of existing firms, such as building a new factory. An increase in supply of a related good example, beef and leather. Climatic conditions are very important for agricultural products. Improvements in technology, example computers, reducing firms’ costs.
In addition, the capital will be less and the technology will be low. Also, because of the less production GDP will be low and the capita per income is less. Moreover, due to lack of proper health facilities the ageing population is less in the developing nations. Due to these reasons the developing nations face more problems of food shortage problems compared to developed nations. Over population is one of the major reason of food shortage problem of our nation.