An Economic Analysis of Demand, Supply, Prices and Elasticities

Economics

Essay 1: An Economic Analysis of demand, supply, prices and elasticities

ABSTRACT: This assignment provides an economic analysis of South African Maize. The objective of the assignment is to find a non –governmental price regulated commodity and examine the determinants of demand and supply, as well as prices, and elasticities of the commodity

Rhodes University

Table of Contents

Introduction: 2

The determinants causing shifts in demand and supply: 2

Price movements: 2

Price and/or income elasticities: 2

Conclusion: 2

References: 2

Introduction: http://commodityhq.com/2012/a-deeper-look-at-south-africas-commodity-industry/

http://awellfedworld.org/issues/scarcity

The determinants causing shifts in demand and supply:

Demand is determined by the needs and wants of people, their competence to pay, and their compliance to pay for the good or service. The law of demand states that when prices increase, demand decreases and as prices decrease, demand goes up (Parkin et al., 2008:).

There are six focal factors that affect demand, which are: Prices of related goods; expected future prices; income; expected future income; population; and preferences. These factors can either cause a movement of the demand curve or a shift of it. A movement along the demand curve (from point A to B, or A to C on graph A below) shows a change in the quantity demanded because a point on the curve shows quantity demanded at a given price. Quintessentially, a shift of the curve (D0 to D1, or D0 to D2 on graph A below) shows a change in demand as the whole curve demonstrates demand.

Supply is determined by firms who supply goods and services that: have the resources and technology to produce it; can make a future profit from the production of the goods and/or services; and has plans to produce and sell the goods and/or services. The law of supply affirms that higher the price of a good or service, the greater the quantity supplied; and the lower the price,...