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Economics and Contemporary Issues

Question:

Discuss about the Economics and Contemporary Issues.

Answer:

Introduction

In the economics, demand and supply are considered as the most important factors that influence the price of a product. Demand and supply are also measured as the backbone of market economy. Along with this, demand and supply also have an effect on the market equilibrium. Market equilibrium is a situation where the price of a product/service remains the same. In other words, it also can be said that, equilibrium is the price wherever the amount demanded by patrons would be equal to the amount supplied by suppliers. The changes in the demand and supply of a product will also influence the equilibrium price and quantity of a product. On the other hand, price is also an important factor that builds a strong connection between these two factors: demand and supply. Apart from this, this research paper would be helpful to depict the major factors that have an effect on the demand and supply of a product in the marketplace. Moreover, in view of this research essay, tea is chosen as a product to recognize affect of factors on the demand and supply.  On the whole, this essay would be beneficial to represent the relationship between supply and demand effectively. 

Demand and Supply of a Product

There are numerous factors exist in the economy of a nation that affect the demand and supply of a product in a wide way (Cleaver, 2014). In the context of this research essay, the major factors that would influence the demand and supply of selected product tea are illustrated as below:

Price: Price is a major factor that influences the demand and supply of a product in the marketplace. As per the law of demand, the price has an effect on both demand and supply side of the market (McLean and Applegate, 2012). For case, if there will be an increase in the price of a product then there will be a decrease in the demand of the product. In opposite to this, if there will be a decline in the in the price of a product then there will be an increase in the demand of the product. In the same way, a drop off in the tea price will increase the demand and supply of tea within the nation in an automatic way. Moreover, a decline in the tea prices will motivate to customers to procure more quantity of tea. Also, the decreased tea prices will also prompt suppliers to supply more quantity of tea to fulfill the demand of the customers in an effective way (Mina, Lahr and Hughes, 2013).

Income level: Income level is also an important factor that influence the demand and supply of a product in the marketplace. For case, an increase in the income level/employment level increases the demand of a product in a country. It is because of the increased income level of people make them capable so they can buy a product in the desired quantity (Yohannes and Matsuda, 2016). Along with this, an increase in the income level of people will increase the demand of tea within the nation. It is well known that tea is a high demanded product in most of the nations and increased income level plays a significant role to fulfill the demand of product in an appropriate way. In opposite to this, if there will be a decline in the income level of the people then it will also influence the demand and supply of tea in the market. It is because of in that case, people would not be able to pay money for tea and also search other substitutes of tea. This will also decline the supply of tea in the market (Ferrell and Hartline, 2007).

Substitute Goods’ Price: The price of substitute goods or products is also a major factor that changes the demand and supply sides of a product. For case, if the alternate good of a product is present at cheaper price then consumers will purchase the substitute product instead of desired product (Delmar and Wennberg, 2010). Along with this, coffee is a major substitute of tea and increased tea prices will decline the demand & supply of tea and will boost demand & supply of coffee within the nation in an automatic way.

Preferences of Consumers: The consumers’ tastes, habits, customs, preferences, needs, desires and so on are the major factors that have an effect on the demand and supply of a product. On the other hand, if consumers choose coffee in place of tea then it will influence the demand of tea in a negative way. In other words, it can be said that there will be a decline in the demand and supply of tea in the marketplace (Yoshino and Taghizadeh-Hesary, 2016). Apart from this, in the winter, tea lovers have a preference of tea that improves the demand and supply of tea in the market.

Probability of Price Changes: Future increased prices of a product also influence the demand and supply of a product. For case, if there is a probability that tea price will increase in the future then the consumers will acquire huge quantity of tea and this will enhance the demand and supply of tea in current. But, the other fact is that, the future increased tea prices will also decrease the demand and supply of tea in future time period (Pevcin, 2012). Consequently, it can be said that, these are the major factors that have an effect on the demand as well as supply side of a product or service in the market.

Conclusion

On the premise of above discussion, it can be assumed that, there is a strong connection between the supply and demand of a product/service. In addition to this, it is also observed that both supply & demand have an influence on one another. Both supply and demand factors are interrelated and also depend on each other. Along with this, it is also scrutinized that there are a lot of factors such as: income level, price, consumers’ tastes & preferences, substitute goods’ prices and so on that have both positive and negative effect on the supply and demand side of a product or service. 

References

Cleaver, T. (2014). Economics: The Basics. USA: Routledge.

Delmar, F. and Wennberg, K. (2010). Knowledge Intensive Entrepreneurship: The Birth, Growth and Demise of Entrepreneurial Firms. UK: Edward Elgar Publishing.

Ferrell, O. C. and Hartline, M. (2007). Marketing Strategy. USA: Cengage Learning.

McLean, W. and Applegate, M. (2012). Economics and Contemporary Issues (9th ed.). USA: Cengage Learning.

Mina, A., Lahr, H. and Hughes, A. (2013). The demand and supply of external finance for innovative firms. Industrial and Corporate Change, 22(4), pp. 869-901.

Pevcin, P.  (2012). Demand and Supply Side View On The Factors Affecting Size Of The Non-Profit Economy. Ekonomska istraživanja, (1), pp.140-162.

Yohannes, M. F. and Matsuda, T. (2016). Weather Effects on Household Demand for Coffee and Tea in Japan. Agribusiness, 32(1), pp. 33-44.

Yoshino, N. and Taghizadeh-Hesary, F. (2016). Monetary Policy and the Oil Market. USA: Springer.

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