Supply & Demand Paper
How this whole world runs is based on the economics from country to country. Economics is the cause and effect of everything from; unemployment, bankruptcies, corporations going under, individual consumers, and the list goes on and on. Every aspect of business and society is related to economics.
With economics lie 3 central problems: what to produce and how much, how to produce it, and who do you produce it for. In our society, especially in the United States, we have one of the strongest economies in the world. In the past year or so, America’s economy has started to slip. For example, it kind of started with the bailouts of the major banks in the ...view middle of the document...
Law of Demand
The law of demand is also simple to understand. According to Investopedia-Forbes Digital Company (2009), the law of demand is, “a microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease and vice versa”. It is simple if you think about it. To use Nike as an example again, if a popular pair of shoes went up in price, the demand will go down and not as many of that particular shoe will be sold. It is the same for everything, food at a restaurant goes up in price, not as many people will eat there anymore. When price drops on something the demand goes up and vice versa. It’s as simple as that.
Changes in Supply and Demand
Let’s talk about the different factors that can cause changes in supply and demand. There are many factors that can change supply. These are not the only factors but some of these factors include; price of inputs, technology, expectations, and taxes and subsidies. “Microeconomic analysis is the foundation of most of the more specialized branches of economics today. These branches include labor economics, which applies supply-and-demand theory to employers and employees, and international economics, which considers supply and demand as it relates to trade between nations” (Detroit: Gale, 2008). So microeconomics, like macroeconomics, is also a foundation for a bigger picture. It deals with many aspects of foreign trade and foreign economics as well.
The price of inputs is when a company has to balance the costs between the profits. If a company is starting to lose money because other costs they are paying are rising, then worst case scenario they would shut down. The underlying goal of business is to make a profit. So when costs rise a company has less incentive to supply, therefore supply goes down.
Technology continues to change this world every day. New more advanced ways of producing are coming out all the time. For example, the...