Business Economics Assignment Solution (Doc)
Added on 2020-10-05
12 Pages2884 Words459 Views
Economics in business
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................1Demand Supply and Pricing............................................................................................................1CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................8.......................................................................................................................................................10
INTRODUCTIONDemand and supply are the key factors affecting the change in the price of a product of acompany. If the demand of a product is high and there is low supply of that product than theprice of the product will rise and on the other hand if the demand of a product is low and highsupply than the price of that product will decline. This report includes analysis of demand andsupply which are the main factors in determining the price of Polo Mints in UK. It also includesshift in demand curve and there effect on the quantity, shift in supply curve and its effect onquantity supplied. The market structures- monopolistic market, monopoly market, oligopolymarket and perfect competition. And the impact of market structures on the determination of theprice of a product by the forces of demand and supply. The factors affecting the price of acommodity and its supply and demand. MAIN BODYDemand Supply and PricingThe law of demand states the inverse relationship between price and quantity demandedthat when there is rise in price there is fall in the quantity demanded and vice versa . And the lawof supply states that when there is when price increases than the supply also increases and viceversa. Price is a value of the product which a seller determines by the various market forces andthe market competition. The price includes the cost incurred in manufacturing the product andthe profit margin of the seller. Also the buyer is willing to pay the specified price by the seller inorder to satisfy his needs(Auer and Schoenle, 2016). Shift in Demand CurveThere is a shift in demand curve being the price of the product remains constant thedemand curve shifts through various factors that are -income of the buyer,taste and preferences,expectations of future prices and the price of related goods. If there is a slight change in any ofthe factors there will be change in the quantity demanded by the consumers in the market.Demand curve can be shifted to the right when there is increase in demand and the priceremaining the same. Also the demand curve shifts to the left when there is decrease in demand ofa particular product at a constant price of the product (Haaland and Venables, 2016).Increase in Demand -As the demand for a product increases by the factors other than the price of a productthan there will be rightward shift in the demand thereby increasing the quantity demanded by the1
customer at a constant price. Demand for a product increases by the factors like income of thecustomer like if the income of the customer rises there will be increase in demand of the productand the customer tends to consume more also when the price of substitute goods increases theconsumer is more likely to purchase the product of lower price. In the illustration 1 there isrightward shift in the demand curve from D to D1 which results in increase in the quantitydemanded from Q to Q1 but the price remaining the same as P(Nikaido, 2015).Decrease in Demand-when the demand decreases through the factors like taste and preferences of thecustomers and fall in prices of the related goods that is if the price of the substitute goodsdecrease than the demand for this product decreases and this will result in the leftwards shift inthe demand curve. Through the shift in demand curve there is reduction in the quantitydemanded by the product by the customers. In the illustration 1 there is shift in the demandwhich is from D to D2 which is a leftward shift. It results in the decrease in quantity demandedof the product from Q to Q2.Illustration 1: Shift in demand curve(Source:Shift in Demand Curve:Increase and Decrease |Microeconomics,2019)Shift in Supply CurveThe supply of commodity by the supplier can be increased or decreased even without thechange in the price of the commodity. The change in supply can be from the various reasons likethe use of new technologies by the company which reduces the cost of the production andincreases the quantity produced in the market at the same price level. The supply can increase or2
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