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

Christmas ’02 - The relationship between demand and supply.

Extracts from this document...

Introduction

Christmas '02: The Relationship between Demand and Supply As the year draws to an end, a familiar and relentless barrage of 'sweet deals' are aired on television, magazines, newspapers, billboards, subways and the more interactive media, the Internet. "Zero down payment", "Interest Free Financing", "Fifty percent off", "Unbelievable Sale" and "No payments till 2004" are the slogans that the advertising media belts out. What are the factors that are encouraging suppliers to sacrifice high margins, cut into profits and even sell products at a loss? Consumers aren't buying. And in order to motivate demand, lucrative incentives must be provided. So why aren't consumers demanding products and services? The reason can be attributed to the fact that the current economy is hurling towards an economic depression. Why do people have less money have to spend? The answer lies in the purchasing power of the dollar. Over the years the purchasing power of the dollar has been steadily going down. This translates into goods becoming more expensive. The more expensive the good becomes, the harder it is for people to buy. ...read more.

Middle

Below is a diagram demonstrating this correlation: In this graph we see the law of supply at work: "As supply rises, the quantity supplied rises; as price falls, the quantity supplied falls". This schedule tells us that the more the number of goods supplied results in higher prices being charged. This scenario is great for suppliers as the attain economies of scale and can harvest more profits. As you can see, the supplier supplies 10 units of the good for $250.00 and 25 units of the good for $1500.00. This brings us to "Equilibrium price and quantity". As you can see, there is a conflict of interest between the demand schedule and the supply schedule. This arises more at Christmas time as consumers are on a shopping spree and still want to maximize their dollar to the fullest. The suppliers also know that Christmas time is a time for an increase in sales and hence want to harvest as much profit as they can. Since this is not possible as there is a conflict of interest, comprises are made and a point of equilibrium price and quantity is sought. ...read more.

Conclusion

Looking at changes in supply levels, we can see some of the determining factors. Supply has been affected by prices of the factors of production. Higher resource prices raise production. Improvements in technology and techniques of production enable manufacturers to produce more units with fewer resource bringing overall costs down. Since businesses treat tax as a cost, subsidies are welcome and help in lowering product costs hence increasing sales. Suppliers also lose out on sales to substitute goods. For Example, a soccer ball producer is always under threat from a baseball bat producer and vice versa. Supply is also affected by complimentary goods. Competition also plays a role in supply prices. However, the biggest influencing factor in supply prices is price expectations. Changes in expectations about the future price of a product may affect the producers willingness to supply that product. During the last few years, the US economy has not been doing so well and more and more people are losing their jobs and therefore do not have enough money to spend. The government has been actively trying to rectify this situation by implementing tax cuts, fiscal and monetary policies. ...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 Marketing & Research 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 Marketing & Research essays

  1. Factors affecting Supply and Demand.

    In the case of products that are substitutes in supply, a rise in the price of one product will cause the supply of that product to extend and the other products to decrease. However some products are in joint supply, for instance, petrol and paraffin.

  2. Applied Business Studies

    The reason that this is done is because I am making a bigger profit by doing this. My employees need to maintain a good customer relation, as if they are arrogant and rude to them, the customers will put in a bad word about the store and might send it

  1. Aravind Eye Hospital - Case

    in 2003 to cater to the people living in northern Tamil Nadu (besides, it was the town where the Aurobindo Ashram was located). As of 2003, the five Aravind Eye Hospitals between them had a total of 3649 beds, consisting of 2850 free and 799 paying beds (for details of the beds in each unit, see Exhibit 2).

  2. Marketing Research

    Research agencies: Agencies like ORG-MARG, AC NEILSEN, and IMRB conduct research on an ongoing basis on various industries. The reports generated by them are quite useful but the fees are on the higher side. 6)YELLOW PAGES/DIRECTORIES: Yellow pages in telephone directories have become an established source of information for business firms.

  1. Business studies, product development

    This is also the most expensive form of advertisement because it has the most competition so you will have to fight against the big companies like Nike to get a slot. This will be the best as well because you can use visual images to help advertise.

  2. SunCity - developing marketing strategy for problem

    I will do this using questionnaires to the customers, I will then decide whether the sunbeds are generating income etc and help perhaps alter the way they promote their products making them seem more appealing. Conclusion- After all of my primary and secondary research has been completed I aim to

  1. Explain, with appropriate illustrations, how demand and supply curves are determined in simple economic ...

    The plotting of these figures gives the graphical representation of the two schedules, called supply and demand curves. For both curves the quantity is plotted on the horizontal axe X and the price on the vertical axe Y. (Young, 2002)

  2. In order for British construction industry to do what they are best capable of ...

    Price for houses increase, demand for houses falls from d to d1. The price elasticity for houses is elastic, slight increase of prices demand falls. Income- Income what people earn in return of their work commitment. As peoples incomes rise their demand for most goods rise, such goods are called normal goods.

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