Business as a field has numerous connections most of which revolve around the quantity of goods and services offered in relation to the response of customers. These connections are however prime examples of business relationships which play a significant role in determination of prices, quantity supplied and that which is demanded. They directly affect the operations of any given market in the world with the analysis of each one of them being of paramount significance. It is worth noting that supply cannot be described without mentioning demand and the two have tangible impact. As a key player in determining the direction of buyers and sellers, price is one element in a market which can tremendously affects supply and demand. Is it possible for supply and demand of any given product to remain constant? It is obvious that the two elements are never constant and are never fixed. A shift in supply and demand affects market equilibrium. The necessity of different goods and services together with the presence of substitutes determine price elasticity. This paper mainly focuses on shifts in demand and supply with changes in the price of a commodity. Common products which experience these phenomena include: beef, milk, bread, salt, coffee, cooking fat, rice, maize flour, sugar and beer. The paper explores Supply Demand and Price Elasticity with reference to beef as a market product.
Identify causes for shifts in supply and demand for the chosen product
Like every market product, the demand and supply of beef is never constant. It varies from time to time depending on a number of factors. For instance, demand for beef refers to the quantity of beef that consumers are willing and able to buy at a given price. This relates price and quantity indirectly such that the higher the price of a given quantity of beef, the lower the demand. On the other hand, beef consumers will be willing to make higher purchases when the price is low. It is obvious that when price of beef falls, many consumers feel rich and able to purchase more. A shift in the demand of beef can therefore be caused by a number of factors. The first one is tastes and preferences of consumers (Chapter 4 Demand and Supply). Before a customer decides to buy beef and not vegetables a personal decision is made. Therefore if say members of a given location prefer eating beef, it is obvious that its demand would be high. On the contrary, the demand of beef automatically falls when consumers do not consider it featuring on their daily menus.
Another factor that determines the demand of beef is the number of consumers. Without consumers, no sales are made. If more willing and ready and willing to buy beef, then its demand directly increase. However, if the opposite happens, suppliers are likely to incur losses. The number of beef consumers may go down say when an outbreak of a disease like anthrax occurs. Since the disease affects both livestock and human beings, very few people would be willing to consume it. The demand therefore falls until the situation normalizes. The income of consumers also causes a shift in the demand of a product. The demand for normal goods is usually high with increase in income whereas that of inferior ones goes down (Chapter 4 Demand and Supply). The extent to which the price of a product like beef changes if referred to as price elasticity.
Likewise, a shift in supply of beef can be affected by various factors. Defined as quantity, of a product that suppliers are willing and able to sell at a given price, supply of beef is determined by the cost of producing it. The cost of having beef available significantly determines what suppliers have to offer in terms of money. These production costs are usually affected by technology, the price beef animals and the involvement of the government in terms of taxes and subsidies. When the technology involved in slaughtering of animals, preparation and preservation of beef is high, very few suppliers would be willing to engage in the business leading to low supply. The same case applies to the cost of animals to be slaughtered and imposition of government taxes. The price of other related products also affects the supply of beef. For instance, when the price of beef increases, the supply of chicken, fish and other related products increase. Beef supply is also affected with the number of suppliers and their expectations based on the other factors mentioned above (Chapter 4 Demand and Supply).
Explain the relationship and influence price per quantity demanded has on the product market equilibrium.
From its definition, demand is a very significant factor in describing market behavior. Many people are willing and able to buy beef when they have enough money and have the willingness to do so. In other words, however much a customer is willing to buy beef; it cannot be possible if money is missing. The price of beef therefore plays a pivotal role in market equilibrium. This equilibrium comes about when both the demand and the supply of beef keep on shifting until it reaches a point when consumers are willing and able to but it whereas suppliers are also willing and able sell at a given price. Suppose the price of one kilogram of beef goes up, very few consumers will be willing to buy it. This would low demand of beef caused by high prices. Because of market of market forces, the high price for beef would encourage more suppliers leading to a surplus of beef in the market. This would force the price to drop, encouraging more consumers to buy beef. However, low prices would result into high demand leading shortage of beef. These shifts reach an equilibrium price where suppliers and consumers of beef have a market consensus (Supply and Demand Curves).
Compare a necessity and commodity product, identifying the availability of substitutions for the product chosen by the team.
Although market forces determine the price of a commodity, consumers are not always in a position to purchase certain goods at a given time. For instance, if a person is considering buying beef it is important to consider the opportunity costs. These decisions are important because of the scarcity of recourses. Informed purchase decisions can only be made when a clear cut line is drawn between a necessity and commodity products. If a consumer wants to buy beef and spend on medication at the same time, it is economically acceptable for such a person to give preference to medical needs and consider buying cheaper substitutes like chicken, fish or even mutton. It allows the consumer to derive satisfaction from the commodity without foregoing a necessity.
Define market systems; who is involved and which your product can be categorized within
Market systems are economic systems which rely on markets in allocation of resources and determination of product prices. These are considered influential in any market since they determination the reaction of both consumers and suppliers. There are three types of market systems which are free economy, planned economy and a mixed. A free market economy system allows buyers and sellers to decide what happens in the market. Consumers determine prices for various commodities and the government has no any form of control. These systems do not exist in the world. On the other hand, a planned market system is controlled by the central government. This is done through regulation of what is produced, production standards and price. Governments control businesses and ensure that no supplier takes advantage over others by providing a fair business ground. This system would fit beef since it requires standard production standards and price control. A mixed system has partial government control of business
Generally the relationship between demand and supply is a very important aspect of business. Fluctuation of these variables usually results into an equilibrium point where consumers are willing and able to buy a product while producers are willing and able to sell a given quantity of product at a specific price. The shift in demand and supply are usually affected by various factors most of which are not permanent. Note worth, market system assist in controlling market operations to allow fairness and high market products.