Principles of Economics

Principlesof Economics

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Principlesof Economics

Demand,supply are some of the ideologies that are mostly found in economics.They are also demonstrated in graphs to enable those who don’tunderstand have a clearer view of them. However other ideologies likeequilibrium come into place when the economy is known to befavorable. In graphical forms, this is shown at the point where thereis an intersection between demand and supply curves (Frank &ampBernanke, 2004). Those willing to purchase items have the ability todo so since the stable point is the equilibrium. Elasticity, marketstructures as well as production costs are also factors of economy.Market structures in a country can determine its economy. Well placedstructures boost the country’s economy and can help in managementof production costs. Some products vary with customers’ tastetherefore making elasticity variable in relation to products (Frank &ampBernanke, 2004). Highly elastic products or services are those thatcreate quick change in quantity supplied or demanded. These productsand services are not necessary in a person’s day to day livelihood.Inelastic products or services are those that create minimal changeor none in quantity supplied or demanded. Some factors that controlprice elasticity are substitute availability of a product, time andincome availability of the consumer (Frank &amp Bernanke, 2004).

Demandand Supply Law

Demandlaw when all additional factors are equivalent, people’s demand ofan item will be less if its price will be high. This shows that if aprice is high, the quantity demand becomes low. People tend to keepaway from buying something that will make them forego something elseof more value to them. A direct connection of between price anddemand of quantity is evitable. Supply law similar to demand lawdemonstrations of sale of supplies with specific prices is seen insupply law. Since selling quantity in bulk at high prices createsmore revenue, producers tend to supply more. However supply, goeshand in hand with time which is not the same for demand. As noted bySamantha (2104), suppliers are unable to quickly react to price ordemand change. Therefore when demand changes the price, suppliersshould investigate whether the change is permanent or just atemporary change.

Equilibrium

Thereare instances where demand and supply become equal. This point ofintersection is called equilibrium. There is efficiency in goodssupplied since their demand is at par with their supply. There issatisfaction of the economic status from both the suppliers andconsumers. The real market’s equilibrium is however obtainedtheoretically. This makes service and goods vary constantly as supplyand demand also fluctuate (Palmatier &amp Crum, 2003).Disequilibrium can however occur if there are factors like excessdemand or excess supply. It can be observed from this article bySamantha (2104) that, excess demand occurs when the price of productsare too low. A lot of consumers desire the products while on theother hand creation of the product is not enough. The competition ofthe product pushes the price higher towards its equilibrium since thesuppliers are pushed to supplying more. Excess supply occurs when theprice of the products are high. Suppliers create high prices with thehope of creating more profits while consumers find that the pricesare too high hence refrain from purchasing the products. Inefficiencyin allocation of products is therefore seen.

Conclusion

Iconcur with the authors reasoning. Elastic products or services arethose that create quick change in quantity supplied or demanded.Suppliers should watch what products are needed to ensure that thereis a balance between supply and demand. However, there will always bethat time where demand and supply will differ. It may be due toclimatic changes or environmental changes that surround theseparticular products or services.

References

Frank,R. H., &amp Bernanke, B. (2004). Principlesof economics(2nd ed.). Boston, Mass.: McGraw-Hill.

Palmatier,G. E., &amp Crum, C. (2003). Enterprisesales and operations planning synchronizing demand, supply andresources for peak performance.Boca Raton, Fla.: J. Ross Pub. :.

Samantha.J. (2104). It`sa Great Time To Be a Miami Office Landlord.Daily Business Review. Retrieved from,http://www.dailybusinessreview.com/home/id=1202674413183/Its-a-Great-Time-To-Be-a-Miami-Office-Landlord?mcode=1202617073880&ampcurindex=2&ampslreturn=20140924092244[accessed on October 24, 2014].