Supply & Demand

Paper - Supply, Demand, and Price Elasticity

Principles of Economics

ECO 212

Paper - Supply, Demand, and Price Elasticity

After identifying many commodities commonly used, the commodity of paper is one example that has been affected by supply, demand, and price elasticity. The shifts in supply and demand for paper follow economic theories. Furthermore, the price per quantity demanded contains significant influence on the market equilibrium of paper. One can compare necessity and commodity products to help identify the limited availability of substitutions for paper. Ultimately, defining market systems will help one understand how paper is categorized and the impact it has on that system.

There are many commodities that continue to influence today’s market. Some of these commodities are but are not limited to batteries, clothing, food, gasoline, paper, pharmaceuticals, refrigerators, shoes, televisions, and water. From this list, paper can be an overlooked commodity that societies have come to depend on.

There are many variables that can shift the supply curve; however here are just a few of the important factors to consider with regards to the paper industry. The first one to consider is the input prices. In order to produce the output of paper, sellers must use various inputs; meaning the type of wood to use (wood chips or sawdust), water, heat, and sometimes chemicals. These chemicals which are added to make paper for coloring purposes, the buildings in which paper will be made and the labor of workers to mix the ingredients and operate the paper machines is always a consideration. When the price of one or more of these inputs rises, producing paper is less profitable, therefore firms supply less paper. If the input prices rise substantially, a firm may shut down and supply no paper. Thus, the supply of a good is negatively related to the price of the inputs used to make the good.

The second item to consider would be the...