Factors Influencing Demand and Supply in the Market: A Study on the Price of Eggs in the UK

Running head: BUSINESS ECONOMICS ASSIGNMENT
Business Economics Assignment
Name of the Student
Name of the University
Author Note

1BUSINESS ECONOMICS ASSIGNMENT
Table of Contents
Answer to Question 1.................................................................................................................2
Answer to Question 2...............................................................................................................12
References................................................................................................................................19

2BUSINESS ECONOMICS ASSIGNMENT
Answer to Question 1
Introduction
There exist different factors which influence the demand and supply of commodities
and services in a market, which in turn have influences on the level of prices in the market.
Keeping this into consideration, the concerned assignment tries to discuss the factors
influencing the changes in demand and supply in the market in general, thereby emphasizing
on the main factors which have influences on the price of eggs in the United Kingdom (Frank
and Cartwright 2013).
Demand and Supply dynamics: Theoretical Framework
The demand of a normal commodity is inversely related with the price level of the
same and the supply of the commodity is positively or directly related to the price levels,
which in turn implies that the demand curve for normal commodities is usually negatively
sloped while the supply curve is generally positively sloped (Hall and Lieberman 2012). The
dynamics in a market are thus, determined by the movements of demand and supply and the
equilibrium situation is at the intersection of the demand and supply schedules in the market,
as follows:

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Figure 1: Demand Supply dynamics and Equilibrium in the market
(Source: As created by the author)
As is evident, the equilibrium is at the point where the demand and the supply curves
cut one another, with the equilibrium price being (P0) and that of the equilibrium quantity
(Q0) (Rader 2014).
Factors affecting demand
The demand curve shifts towards the right when the demand for products increase in the
market and to the left when the demand decreases. This is evident from the following
diagram:

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Figure 2(a): Increase in demand Figure 2(b): Decrease in demand
(Source: As created by the author)
With the increase in the demand, supply remaining unchanged, price of the product
increases and with the decrease in demand for a commodity the price also decreases (Ruttan
and Thirtle 2014). There are different factors which affect these changes in the demand curve,
which are discussed as follows:
Keeping other factors unchanged, the demand for products usually increases or
decreases due to the following factors:
Income- An increase in disposable income results in an increase in demand for products in
general and vice versa.
Substitutes- With the increase in the price of the substitutes, the demand for the products
increases and vice versa (Kalecki 2013).
Complements- With the hike in the price of the complementary products of a commodity, the
demand for the commodity itself and vice versa.

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Seasonal factors- In many instances the seasonal factors like whether and others lead to
increase or decrease in the demand for certain products or services (Friedman 2017).
Government Policies- The demand for products and services can also depend on the policies
implemented by the government (which may include pricing policies as well as that of tax
and subsidy policies (Canto, Joines and Laffer 2014).
Expectations- The expectation of the consumers regarding future prices also influence the
demand for the products. When the future expected price increases, the current demand for
the commodities increase and vice versa.
Advertisement- Promotional policies and advertisements also have implications on the
demand for the products (Helmes and Schlosser 2013).
Factors affecting supply
Like that of demand, the supply curve for products shifts rightwards with the increase
in the supply and leftwards with the decrease of the same, as the following figures shows: