Concepts of Supply and Demand Essay Example | Topics and Well Written Essays - 2500 words

Concepts of Supply and Demand - render ExampleFigure 1.0 below shows in detail what the ginger snap of consider portends for the equipment casualty and quantity of a given item as a function of graphic analysis. Of course it cannot always be understood that price elasticity of occupy will be a primal motivating factor (Fouquet, 2012). callable to the fact that the market for many levelheadeds and services has a very inelastic price elasticity of demand, the veridical level of demand that consumers express bears little relation to the price that is being offered for the devout. Figure 1.0 Source Marban, Zwaan, Grigoriev, Hiller, & Vredeveld, 2012 This crabby graph is indicative of an elastic demand contract. It is important to bear in mind that the demand curve is not steeply sloping rather, it exhibits a gradual decline as price fluctuates. Naturally, determinants such as consumer time horizon will greatly impact the total elasticity that is represented in the supra repre sentation by elongating and flattening the demand curve as a result of the fact that the consumer believes that the cost is potential to wobble within the near future (Chai & Moneta, 2010). Similar changes to the demand curve will also be noted if/when changes to the consumers income are noted and/or if the availability of substitutes weakens or strengthens the demand that has hitherto been illustrated. hybridizing price elasticity Similarly, cover price elasticity is a term that is used to measure the responsiveness of the demand for a given good to the change in price of a competing good. This level of change is given as a ploughshare point and is derived as a function of measuring the luck change in price of the secondary good/commodity (Marban, Zwaan, Grigoriev, Hiller & Vredeveld, 2012). As a quick example, if the price of shipping were to increase by 10% and the price of the finished good itself were to decrease by 25%, the following formula would be used to calculate the cross price elasticity of the given good -25/10= -2.5. In this way, the reader can see the level to which competing goods/commodities play with relation to the elasticity of demand for a given product within the marketplace (Khan, 2012). An important fact to note is that the question of whether the cross price elasticity is positive or negative denotes whether or not the given good/commodity in question is either complimentary or supplementary of the primary good. Negative cross elasticity means that two products are compliments whereas a positive means that they are supplementary to separately other. Figure 2.0 represents the graphical interpretation of cross price elasticity. Figure 2.0 Source Arak & Spiro, 1973 Income elasticity Thirdly, this design analysis will consider the term income elasticity. This can be described as the responsiveness of demand for a given good or service to the change in the overall income of the individuals who are demanding the item. In much the sam e way as the previous term was calculated, income elasticity is calculated as the percentage change in the demand as compared to the percentage change in the income of the affected consumer base (Fouquet, 2012). In this way, the observer could calculate a 10% increase in income as compared to the demand for a good increasing by 20% as 20%/10%=2. Figure 3.0 illustrates the decreasing demand for a product as a function of reducing incomes of the affected population that would otherwise serve as the primary consumers of the given good/service/commodity. Figure 3.0 Sources Fouquet, 2012 Increases in consumer spending/income would