• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

A casestudy on price, demand and supply

Extracts from this document...

Introduction

Explain what is meant by business economics and how the price effects changes in demand and supply. What is business economics: - Clearly we will be studying firms: the environment in which they operate, the decisions they make and the effects of these decisions - on themselves, on their customers, on their employees, on their business rivals and on the public at large. But what particular aspects of business does the economist study? Firsts are essentially concerned with using inputs to make outputs. Inputs cost money and output earns money. The difference between the revenue earned and the costs incurred constitutes the firms profit. Firms will normally want to make as much profit as possible, or at the very least to avoid a decline in profits. In order to meet these and other objectives, managers will need to make choices: choices of what types of output to produce, how much to produce and at what price, choices of what techniques of production to use, how many workers to employee and of what type, what suppliers to use for raw materials, equipment etc. ...read more.

Middle

At the same time, it will discourage consumers from buying so much. The price will continue rising until the shortage has thereby been eliminated. If on other hand consumers decide they want less of a good (or if) if producers decide to produce more, supply will exceed demand. The resulting surplus will cause the price of the good to fall. This will act as a disincentive to producers, who will supply less, since production will now be less profitable. It will encourage consumers to buy more. The price will continue falling until the surplus has thereby been eliminated. The price, where demand equals supply is called the equilibrium price. By equilibrium we mean a point of balance or a point of rest: in other words a point towards which there is a tendency to move. The same analysis can be applied to labour (and other factor) markets, except that here the demand and supply roles are reversed. Firms are the demanders of labour. Households are the suppliers. ...read more.

Conclusion

A change in supply: - A rise in supply is signalled by a fall in price. This then acts as an incentive for consumer to buy more: the quantity demanded rises. A fall in supply is signalled by a rise in price. This then acts as an incentive for consumers to buy less: the quantity demand falls. Conclusion: - If the demand for a good exceeds the supply, there will be a shortage. This will lead to a rise in the price of the good. If the supply of a good exceeds the demand, there will be a surplus. This will lead to fall in the price. Price will settle at the equilibrium. The price equilibrium price is the one that clears the market: the price where demand equals supply. This is shown in a demand and supply diagram by the point where the two curves intersect. If the demand or supply curves shift, this will lead either to a shortage or to a surplus. Price will therefore either rise or fall until a new equilibrium is reached at the position where the supply is reached at the position where the supply and demand curves now intersect. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Case Studies and Analysis section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Case Studies and Analysis essays

  1. NETFLIX CUSTOMERS SATISFACTION

    exch?nges where these ?re benefits to e?ch p?rty from forfeiting individu?l opportunism. ?ccording to the rel?tionship m?rketing theory, the l?tter ?dds v?lue on the buyers ?nd the sellers. Both encounters benefit on this rel?tionship. Therefore theories of rel?tionship m?rketing b?sed on tr?ns?ction cost economics ?nd resource dependence h?ve noted th?t

  2. PEST is a planning tool which is used by a business to evaluate and ...

    This will affect Ginsters as they will have less crops available to be able to put into their products, this means the quality of their products will decrease as they will not have as many products to put into their pasties, this is because if all the crops have died they will be unable to put them in their products.

  1. Business plan. The business that I am going to produce is a personalised logo ...

    In addition I have completed a levels in accounts and business, as a result I do have little knowledge, I am also sure that my a level teacher would be supportive if I am in need of further information. However banks which are generally one of the most helpful sources

  2. Financial Feasibility of Opening A Business

    the UK, it works in a cycle, if less people are available to regularly go out and drink, then the less custom is produced for the bar, therefore the bar is forced to close. This cycle would be catastrophic should I fall in to it, and by extensive promotion and attraction of passing trade I should prevent myself from succumbing.

  1. I am going to carry out an investigation into S Parton Construction Ltd. I ...

    11.26 Male full-time workers 10.00 11.12 11.91 Female full-time workers 9.01 9.61 10.28 As you can see from the table, the average weekly gross pay for full time workers in Wolverhampton is �388.10. If you compare this to the average weekly gross pay for the West Midlands which is �421.10,

  2. Business Economics

    But one thing is that more could have been done to prevent the damage from being on the scale that it resulted in. Secondly with the oil companies they are partly responsible as they are producing less than before, for one reason they will say Katrina, but looking at it

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work