Report on Use of Supply and Demand Analysis

Added on - 17 Dec 2019

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Economics1
TABLE OF CONTENTSIntroduction......................................................................................................................................3Task 1...............................................................................................................................................3Conclusion.....................................................................................................................................11REFERENCES.............................................................................................................................122
INTRODUCTIONEconomic is the social sciences there is action that include the production, consumptionof products, and distribution and services in all the level at the society. One of the assessingeconomic activity is the gross domestic products. In the present reports covers the use of supplyand demand analysis for identifying the main factors which determine the price of diamonds.Apart form this, negative externalist which can arises form excessive tobacco consumption byindividual is identified. Along with this, the way which government is adopting to reduce thetobacco consumption is described.TASK 11).Law of demand means that other things equal means if price of goods and services risesthen demand will fall, while if the price of goods and services decrease then demand willincrease.Law of supply: the law of supply holds that if the price of other things equal, when price of agoods rises its quantity supplied will rise, while if price of goods and services fall then its supplywill also fall. the use of supply and demand analysis there are various factor that can bedetermine the price of diamonds (Burkhard, Nedkov and Müller, 2012.). There are variousfactor which determine the price of diamonds that are as follow:Taste and preferences of the consumer:the taste and preference is the important factorwhich determine the price of diamonds. Mostly diamond is like by all people but itcannot be affordable by some people so the demand of the diamond will be no higher(Roberts and Schlenkera, 2013). The changes on demand of diamonds occur with thechanges in fashion and because of the pressure of advertisement by the seller andmanufacturer. There many people like diamond and spend their income on buying it sothat demand curve will be lie at higher level.Income of the people:income of the people also affects the demand of the diamondamong the people. If the income of people is high then they will buy the diamonds as itcost higher or lower. While the rise in income of the people , the demand curve increasethen whole demand curve will shift upward and vice versa (Yang, Williams and3
Goldstein, 2014.). The higher income led to higher purchasing power, it is the reason thatincrease in income have positive effect demand for diamond. For example people whoincome is high and live luxury life they can easily affords the price of diamond even if itis high.The number of consumer in the market:The number of consumer in the market alsoaffects the demand. If there is greater number of consumer in the market of then demandof the diamond will be rise. Then price of the diamonds will also increase because of theincreasing demand (Kroll, Müller and Fohrer, 2012). The number of factors in whichconsumer of a goods depends. If consumer substitute for one good on other then numberof consumer for that substitute goods will be decline and demand of the goods whichused on that place will increase.Changes in propensity of consume:The Propensity to consume also affects the demandfor them. If consumer price remain constant then, and their tendency to consumeincreases then they spend a greater part of their income on buying the diamonds(Azevedo and Leshno, 2014). As a result then demand for the goods also increases. Itmakes clear that if consumer want to buy a products even with low income then their l bechanges in demand.Consumer expectation regard to future prices;If the price of diamond increase then infuture demand of the goods will be rise. Due to some reason consumer expect that priceof the particular products rise then presently they will buy that good in higher quantity.So the demand curve move to higher level.Nature of commodity: when there is necessity of the commodity then the demand isinelastic while if commodity is required for comfort of for fashion then demand will begenerally elastic (Breeze, Vaissière and Seraphides, 2015). For example Diamond iscome in Comfort zone it is no the necessity of the people sot it is elastic.Although Diamond is very popular and if its manufacturer raising its price then costumerwill start substituting other precious gems, such as rubies and emeralds. When the price ofdiamonds increase then demand for the diamond will be decreaseUsing of supply analysis for identifying the factors which determining the price of diamond;4
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