Economics: Shifts in Demand and Supply

This economics assignment delves into the core concepts of demand and supply, examining how shifts in these curves influence market equilibrium. The analysis focuses on understanding the relationship between price, quantity, and factors that cause changes in either demand or supply. Students are expected to illustrate these concepts using graphical representations and real-world examples.

Economics

TABLE OF CONTENTS
Introduction......................................................................................................................................3
Market Equilibrium..........................................................................................................................3
Effect of Technology on Product Market Equilibrium................................................................3
Implication for national economy if various firms are affected by the technology.....................7
Conclusion.......................................................................................................................................9
References......................................................................................................................................10
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INDEX OF TABLES
Table 1: Changes in equilibrium due to shift in demand curve......................................................4
Table 2: Changes in equilibrium due to shift in supply curve........................................................6
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ILLUSTRATION INDEX
Illustration 1: Shift in equilibrium...................................................................................................5
Illustration 2: Downward shift in equilibrium due to change in demand curve..............................7
Illustration 3: Shift in supply curve and change in equilibrium price..............................................8
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INTRODUCTION
Market equilibrium can be defined as market point where demand of consumer is
equivalent to the supply provided by the suppliers. Point of equilibrium is directly connected to
the factors of demand and supply (Yomba, 2009). Due to this aspect, equilibrium will be shifted
with the change in the factors that can make change in the demand and supply in the market.
Present study is focused on the evaluation of impact of technology at the point of market
equilibrium. Further, evaluation of impact on change in technology will be done by considering
macro-economic factors.
MARKET EQUILIBRIUM
1). Effect of Technology on Product Market Equilibrium
Equilibrium in economic terms is referred to a situation where demand and supply of any
article or product are equal to each other. Every company tries to achieve and maintain
equilibrium as shortfall in either demand or supply will lead the company towards loss (Siebert,
2007). Equilibrium of price in product market can be affected either by macro-economic factors
or micro-economic factors.
Micro economics consists of factors, shift or alteration of which will affect only a small
part of economy like particular unit or segment of industry while macro economics studies
economy as a whole. Micro-economics relates to individuals and business decisions while macro
economics helps in decision forming relating to whole country rather than every single unit
(Tohidinia, 2011). Companies when adopt new technologies either to increase their revenues or
enhancing their growth, there will be an impact on the product market equilibrium of that
particular company. This is known as Micro-Economics because adoption of new technology by
a company will affect the equilibrium position i.e shift in demand-supply of that company only.
2). Supply and demand curve
Supply and demand curves can be defined as the graphical presentation of the price and
quantity. In such graphs price is demonstrated on y axis and quantity of good is reflected on x
axis. It is most basic and fundamental economic model for the prediction of the optimal prices in
the market. Equilibrium price point is intersection point of demand and supply curve (Avlonitis
and Giannopoulos, 2012). Change in technology will have direct impact on the supply and
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demand curve. In addition to this, it will also make shift in the point of equilibrium either to up
or down.
By considering the type of good, technology could make complete elimination demand. It
is because good will become obsolete as effective substitute good is developed by the technology
(Boon and Wong, 2011). This aspect is mainly noticed in the mobile phones. In such situation
demand is shifted from right to left and equilibrium price will be lowered where suppliers will
not be able to supply good along with the profit.
2(i) Changes in demand curve
Changes in demand curve is occurred in situation where there in increase or decrease in
the quantity demand at particular point of price. Increase in demand at market will make
rightward shift will decrease in demand will make leftward shift (Just and Rausser, 2007).
Impact of this shift on equilibrium can be understood through the following table:
Table 1: Changes in equilibrium due to shift in demand curve
Shifts in the Demand Curve (when supply is unchanged)
Shift to the right It will make increase in
demand
It will cause equilibrium to
increase
Shift to the left It will make decrease in
demand
It will cause equilibrium to
decrease
Introduction of new technology in product market will make increase in the demand of
product with the new technology. Consequently, there will be reduction in the demand in the
product with the old technology (Changes in Demand and Supply and Impacts on Equilibrium,
2015). Impact of these changes in equilibrium point will be as follows:
For example X company had launched new series of particular mobile phone i.e. 0001 in
the market then there will be rightward shift in demand of product 0001. Position of equilibrium
in this situation will be as follows:
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At initial level demand of 0001 was at Q1 and price of product will be at P1. With the
launch of new series, demand of new product will have rightward shift i.e. D1 to D2. By
considering this aspect, it can be noticed that equilibrium will be attained at higher point and
consequently price of equilibrium will be increase from P1 to P2. In this situation, there is
upward shift in the point of equilibrium.
There will also be reduction in the demand of the good with the old technology and
consequently price of the goods will be reduced in order to attain the point of equilibrium
(Brooks, 2002).
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Illustration 1: Shift in equilibrium
(Source: Bold and Vega, 2003)

In accordance with this illustration, it can be noticed that demand of product in reducing
from Q1 to Q2. Due to this aspect, there is leftward shift in the demand curve. In this situation in
order to attain the point of equilibrium suppliers will be required to make reduction in the price
of product with the old technology.
By considering the factors of supply curve it can be said that launch of new technology in
the product market will make increase in the equilibrium price of the new product (Avlonitis and
Giannopoulos, 2012). Along with this it will make reduction in the equilibrium price of the
product with old technology.
2(ii) Changes in supply curve
There is shift in supply curve with change in quantity of supply provided by the supplier.
Increase in supply makes rightward shift while reduction in supply will provide leftward shift
(Wessels, 2000). Impact of this shift on the equilibrium price in the product market is as follows:
Table 2: Changes in equilibrium due to shift in supply curve
Shifts in the Demand Curve (when supply is unchanged)
Shift to the right It will make increase in supply It will cause equilibrium to
decrease
Shift to the left It will make decrease in supply It will cause equilibrium to
increase
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Illustration 2: Downward shift in equilibrium due to
change in demand curve
(Source: Changes in Demand and Supply and Impacts
on Equilibrium, 2015)

Introduction of new technology will also have impact on the supply curve. It is because;
with the increasing demand various suppliers will tend to provide product in the market and
consequently there will be right shift in the supply curve (Dowling, 2009). With the launch of
new technology in competitive market, suppliers will make increase in the supply there will be
right shift in supply in order to cope up with the demand. Due to this aspect, customers have the
option for the purchase as supply is higher than the demand and consequently price of
equilibrium will have downward shift (Avlonitis and Giannopoulos, 2012). This aspect can be
noticed through following example:
For example new technology of growing wheat in introduced in the market that can make
reduction in the cost of production. In this situation, producers will be willing to supply more
quantity in the market. Impact of increase in supply can be noticed through following
illustration:
This illustration shows that if quantity is increased from Q1 to Q2 then equilibrium will
be attained at lower point as suppliers will be required to make reduction in the price of product.
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Illustration 3: Shift in supply curve and change in
equilibrium price
(Source: Changes in Demand and Supply and Impacts on
Equilibrium, 2015)

In addition to this, there will be reduction in the supply of product with the new technology
because it is no longer profitable to the suppliers.
3. Implication for national economy if various firms are affected by the technology
Macro-Economics is when various firms adopt the practice of adoption or change of
technology affecting the demand-supply cycle of whole industry and thus there will be an impact
on national economy. Product market equilibrium will be influenced when new technologies are
adopted in a manner explained below :
 Change in Supply : Supply is affected by the technological changes in a way that how
much a company is able to increase its production with such change in technology.
Suppliers will be required to provide excessive supply of goods and services in order to
cope up with the increasing demand in the economy (Eaton, 2015). In addition to this,
increase in supply will be supported by the improved technology.
 Production-possibility frontier (PPF): Technological advancement will make increase
in the productivity of the companies which will provide upward shift to the graph. For
example advancement in technology of transportation, energy systems, logistics and
communication system will make increase in standard of living.
 Contribution to the GDP growth: Technological improvement in product market will
make increase in the GDP of the nation. It is because, organizations will be able to make
increase in their profitability and consequently their per capita income will be increased
(Reut and Scerri, 2009). Further, growth of businesses is connected to the growth of
economy. For example if there is 10% growth in business than 10% of it will be
transferred for the increase in GDP.
 Business innovation: In situation where various firms are affected by the new
technology then they will be work to launch more effective technology in the market in
order to stay competitive. In this manner, fair competition will be increased in the market
and organization will work in more effective manner (Moseley, 2010). With the
innovative ideas, they can expand their business operations at the global level in order to
attain higher profitability and growth.
 Product development: New technology will make increase in the efficiency of business
and there will be reduction in the cost of production. With this approach, business
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organizations will be able to make increase in their production capacity without spending
high resources. Increase in production capacity will boost the economy but there will also
be issue of unemployment (Dowling, 2009). It is because; technology will promote
machine work instead of manual work. These factors show that technology have positive
as well as negative influence of the economy.
 Influence for international trade: With the invention of new technology, business
organizations can export their goods to the another countries as improved technology will
make increase in the capacity of production. In addition to this, national debt is connected
with the trade between countries (Boon and Wong, 2011). Due to this aspect, increasing
export will make position of the country strong at the international market and there will
also be upliftment in rate of currency.
 Improved quality at lower price to the customers: Customer will also attain the benefit
of improvement in technology. It is because, qualitative product will be available at lower
price in the market (Siebert, 2007). This aspect will make increase in their purchasing
power and consequently there standard of living will be improved.
 Development of employment opportunities: New inventions of technology creates
various jobs opportunities for the individuals. However, for this aspect they are required
to learn new skills and change their job roles by considering the situation. For this aspect,
technology advancement in wireless industry can be considered. This industry had
provided employment to the thousand of workers for the App businesses and had
supported in the growth of economy (Moseley, 2010). This aspect demonstrates that
growing business has potential to make increase in the availability of jobs in order to
balance the shortage of workers occurred due to instalment of new techniques in work
practices.
By considering the above description, it can be noticed that wealth of nation will be
increased by the technological advancement in the economy. It is because, organizations are able
to earn high profitability and customers are able to make increase in their living standards. In
addition to this, it will also create opportunities for employment for further development.
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CONCLUSION
In accordance with the present study, conclusion can be drawn that technology has
significant impact on the equilibrium price in the market. With the improvement or decrement in
the technology simultaneous impact can be noticed in the equilibrium price. It is because of the
model of supply and demand in the economics. Further, if various competitive firms are affected
by the implication of the technology then entire national economy will be influenced. It is
because when various firms adopt the practice of adoption or change of technology then there
will be effect the demand-supply cycle of whole industry.
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REFERENCES
Books and Journals
1. Avlonitis, J. G. and Giannopoulos, A. A., 2012. Balanced market orientation: qualitative
findings on a fragile equilibrium. Managing Service Quality: An International
Journal. 22(6). pp.565 - 579.
2. Bold, F.X. and Vega, C., 2003. Micro E ects of Macro Announcements: Real-Timeff
Price Discovery in Foreign Exchange. American Economic Review. 93. pp. 38–62.
3. Boon, S. and Wong, Y. C., 2011. The moderating effects of technological and demand
uncertainties on the relationship between supply chain integration and customer
delivery performance. International Journal of Physical Distribution & Logistics
Management. 41(3). pp.253 - 276.
4. Brooks, C., 2002. Introductory Econometrics for Finance. Cambridge University Press.
Cambridge. United Kingdom.
5. Dowling, E., 2009. Schaum's Outline of Mathematical Methods for Business and
Economics. McGraw Hill Professional.
6. Just, E. R. and Rausser, C. G., 2007. General Equilibrium in Vertical Market Structures:
Overselling Versus Overbuying, in Richard O. Zerbe ,Research in Law and
Economics. Emerald Group Publishing Limited. pp.149 – 181.
7. Moseley, F., 2010. Criticisms of Aggregate Demand and Aggregate Supply and
Mankiw's Presentation. Review of Radical Political Economics. 42(3). pp.308-314.
8. Reut, A. and Scerri, K., 2009. UK public finances and oil prices. Luxembourg:
Publications Office.
9. Siebert, H., 2007. Global View on the World Economy: A Global Analysis. Routledge.
10. Tohidinia, A., 2011. The feasibility of effectual ethics on the foundations of micro and
macro issues of economics. Humanomics. 27(4). pp.243 - 251.
11. Wessels, W., 2000. Economics. Hauppauge, NY: Barron's.
12. Yomba, P. J. S., 2009. Micro Economics to Macro Economics: The Concept of Market
Exchange Rate. AuthorHouse.
Online
1. Changes in Demand and Supply and Impacts on Equilibrium. 2015. [Online]. Available
through < https://www.boundless.com/economics/textbooks/boundless-economics-
textbook/introducing-supply-and-demand-3/market-equilibrium-48/changes-in-
demand-and- supply-and-impacts-on-equilibrium-181-12279/>. [Accessed on 25th
December 2015].
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2. Eaton, J., 2015. Technology and the Global Economy [Online]. Available through
<http://www.nber.org/reporter/summer99/eaton.html>. [Accessed on 25th
December 2015].
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