Economics Essay on Demand and Supply
Essay
During this year’s exceptionally hot summer, ice cream manufacturers started using a new, cheaper method of ice cream production. Assume the market is initially in equilibrium. One has to reflect the following issues in this essay:
1. To show on a diagram the initial market equilibrium for ice cream.
2. To show the effect of a hot summer on ice cream demand.
3. To show the effect of the use of a cheaper ice cream manufacturing method on the ice cream supply.
4. To discuss the resulting changes in equilibrium price and the quantity trade.
In Economics, supply and demand are one of the fundamental concepts. Market price for any commodity is determined by the outcome of demand and supply. The literature explains that where the supply and demand are closely related to each other.
Demand
The demand is the amount or quantity of the product that the customer is willing to buy at a given price, assuming all other factors remains unchanged (ceteris paribus). The law of demand states that, if all other factors remains equal, higher the price of good, lower the demand of the product in the market and vice versa. There is an inverse relationship between the price and the quantity demanded for any particular good in the market. Generally, the quantity purchased by the buyers at a higher price is less because as the price goes up, the opportunity cost of the buying that product also increases. Therefore, consumers would avoid buying a product, which would force them to consume something else they value more.
Supply
The supply is the amount or quantity of the product that suppliers are willing to supply in the market at a given price. Law of supply states that, the supply of good increases when there is higher price for the same in the market as the manufacturers wants to maximize their profit. That shows that there is a reverse relationship between the price of the commodity and the quantity supplied.
These theories of demand and supply are often
During this year’s exceptionally hot summer, ice cream manufacturers started using a new, cheaper method of ice cream production. Assume the market is initially in equilibrium. One has to reflect the following issues in this essay:
1. To show on a diagram the initial market equilibrium for ice cream.
2. To show the effect of a hot summer on ice cream demand.
3. To show the effect of the use of a cheaper ice cream manufacturing method on the ice cream supply.
4. To discuss the resulting changes in equilibrium price and the quantity trade.
In Economics, supply and demand are one of the fundamental concepts. Market price for any commodity is determined by the outcome of demand and supply. The literature explains that where the supply and demand are closely related to each other.
Demand
The demand is the amount or quantity of the product that the customer is willing to buy at a given price, assuming all other factors remains unchanged (ceteris paribus). The law of demand states that, if all other factors remains equal, higher the price of good, lower the demand of the product in the market and vice versa. There is an inverse relationship between the price and the quantity demanded for any particular good in the market. Generally, the quantity purchased by the buyers at a higher price is less because as the price goes up, the opportunity cost of the buying that product also increases. Therefore, consumers would avoid buying a product, which would force them to consume something else they value more.
Supply
The supply is the amount or quantity of the product that suppliers are willing to supply in the market at a given price. Law of supply states that, the supply of good increases when there is higher price for the same in the market as the manufacturers wants to maximize their profit. That shows that there is a reverse relationship between the price of the commodity and the quantity supplied.
These theories of demand and supply are often
References: Clark, J.B. (1968). Essentials of economic theory. New York: The Macmillan Company. Haveman, R.H., & Knopf, K.A. (1970). The market system (2nd ed.) New York: John Wiley & Sons, Inc. Mordechai, E.K. (1998). International Economics (8th ed.) U.S.A., Dryden Press. Samuelson, P.A., Nordhaus, W.D., Richardson, S., & Scott, G. (1994). Economics: Micro Economics, (3rd ed) Australia, Mc. Graw Hill. Taft, R. (2005). Growing your business globally (1st ed.). Southbank: The Thomson Corporation. Wilson, J.H., & Clark, J.R. (1988). Economics: The science of cost, benefit, and choice (2nd ed.). Cincinnati, Ohio: South-Western Publishing Company.