Supply and Deman and Price Elasticity

Supply and Demand and Price Elasticity

Principles of Economics /ECO 212

There are many causes that change the supply and demand of a product. Supply deals with the role of the sellers or producers of a product.The causes that change supply are; price, quantity, technology, government, and expectations. The price and quantity of a product directly affects the profit. If the price of a product increases, then the amount of revenue will also increase leading to the an increase in the quanitity supplied. If the price of a product decreases, this leads to a small amount of revenue and the quanitity supplied will also decrease. Technology is a cause of supply because if technology improves, the more output can be produced therefore lowering costs. If technology worsens because a product has to change the way it is being produced, then cost wil rise. The governemt is also a cause of supply. If taxes are implemented, this will raise costs, whereas government subsidizing will lower the cost. Future expectations is also a cause of supply. If it is anticipated that the price of a product will go up, then suppliers will cut back production taday to make higher profits when the cost goes up. If the expectation is that the price will go down, then suppliers will increase what they offer now to make a larger profit now.

The causes that change demand are price, complimentary goods, substitution products, income, tastes and preferences, and expaectations. Demand focuses more on an individual or a household. If the price of a product rises, then there is a reduction of demand. If the price is low, the demand is high. The price of complimentary goods also effects the demand the same way. The proce of substitute products works the opposite way on demand. If the price of the substitute product goes up, than the demand for our product goes up. If the price of the substitue product decreases than there is a lower demand for our product. Income has other factors...