Effect of Price on Demand and Supply in Economics

Running head: ECONOMICS ASSIGNMENT 1
Economics Assignment
Name
Institution

ECONOMICS ASSIGNMENT 2
Economics Assignment
Introduction
The law of demand and supply is a theory that elucidates the interaction between the
supply of a product and the demand for that product. Naturally, high demand and low supply
surge price. Contrary, the higher the supply and the lower the demand, the price tends to
decrease. In the real world, the law of demand continues to influence various sectors of
production with food industry not being an exception. The reality remains that many products in
the market fall under different categories of goods including normal goods, inferior goods,
substitutes, compliment among others, and their price movements greatly determine their level of
supply and demand at one point of time. As for the current assuming little or no government
regulation of the market, these forces of demand tend to determine the prices of the commodity.
This is paper provide a solution to the three question by studying the effect of a price reduction
or increase on the demand and supply of a quantity of a product in a market.
Q1 (a)

ECONOMICS ASSIGNMENT 3
Source: https://www.subsitutes_effecrs_demand_curve.com
Beside supply law, demand law also relates to food since there is both an income and
substitution and effect that strengthen each other. In line with the law of supply, Brown,
Schwann, and Scott, (2008), explain that the quantity of good that is supplied rise with the surge
in market price of a commodity and declines as the price drops. In contrast, the law of demand
clarifies that the quantity of a product demanded drops with an increase in its market price and
vice versa. Prasch (2008) elaborates that the law of demand applies to foodstuffs because
substitutes effects as well as income effect that sustain each other. In other words, it can be
detailed that when there is an increase in the price of food products, consumers prefer buying the
other substitutes for the overpriced foodstuffs to sustain the consumption patterns. For instance,
suppose the foods served in an eatery are more expensive than the cost of cooking at home, this
will make many people opt for consuming homemade foodstuffs that are reasonably cheaper. It
is correspondingly indispensable to note that price increase also exert an adverse effect over the
income impact, thus making people have a tendency of buying lesser quantities of food products.

ECONOMICS ASSIGNMENT 4
Source: https://www.income_effecrs_demand_curve.com
Based on the two accounts, it can be deduced that an increase in price of food products reduces
their demand and vice versa, like any other commodity or services.
Q1 (b)
In response to the question above, a large number of consumers prefer to buy the food
products that are relatively cheaper, when there is an increase in the market price of foodstuffs.
Furthermore, have a tendency of consuming the less expensive foods that serve as a substitute for
the expensive food products that are available in the market. For instance, if the price of a certain
type of rice in the market is increased, many people will opt to buy the inexpensive type of rice
accessible in the market. Therefore, the low-priced variety of rice will turn out to be a substitute
for the costly variety of rice that is offered in the market. Another example would be in a market
where the market price of non-vegetarian foodstuff rise. In this case, a considerable proportion of
people would prefer consuming the vegetarian food commodities that are accessible in the