Supply & Demand, and Price Elasticity
All things in our society are connected in some way, for example, how humans relate to each other. Complex ideas and analysis are not without their own set of unique connections. The intricate theories of economics are a prime example of this connection. To gain an accurate understanding of how supply and demand are connected, and its role within the market, one must analyze the functions of each as separate entities, and how they relate to economics as a whole. To begin analysis, one must examine what causes change between supply and demand. Once this has been achieved, investigating how changes in price and quantity influence market equilibrium, and how the necessity of a good and the availability of substitutions impact price elasticity will need to be conducted. The final step will be to compare and contrast market systems and the role of an economist within these systems. In order to discover what causes change in supply and demand, people need to understand the definition, different forms, components, and principles. Supply is defined as the amount of product a producer is willing to provide or sell, while demand is the amount of product a buyer is willing to receive or buy. There are two forms of supply: individual and market. Individual supply is the amount of product offered at different prices at a given time by a seller. Market supply is the amount of the product in the marketplace. The components of supply are the price of the product, the price of input goods, the state of technology, taxes and subsidies, and expectations about the future market price. An example of a cause that would change supply is the change in the cost of supplies and resources: if the cost goes up, producers will decrease their supply. The law of supply is the amount of the products offered by the sellers, directly related to prices of all things being equal (ceteris paribus). There are two forms of demand similar to supply: individual...
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