• 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...


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.


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.


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. Marketing Research

    They then collect the information from the respondents. 8.2 Analyzing the information a) Editing : It is done in two stages . The first stage is the field editing which is done to detect the glaring omissions and inaccuracies, immediately after collection because the interviewers have fresh memory about the lapses and wrong statements.

  2. Applied Business Studies

    These employees would help me to maintain a business, and they would help me to create a successful service and then the customers would be getting a unique service that I would be offering. I now have to decide how many employees I am going to hire for my business.

  1. Consumer Decision Making Process for Purchasing Property in Spain

    Approved Ethics Forms 85 Appendix VII Data Analysis 86 Appendix VIII Data Analysis Formulae 88 Appendix IX Cross Tabulated Data 89 Appendix X Cross Tabulated Data with Formulae 91 Appendix XI Satisfaction Levels 92 Appendix XII Repeat Purchase 93 Appendix XIII Subconscious Information Search 94 Appendix XIV Property Exhibition Attendance

  2. Price Elasticity of Demand.

    Determinants of Price Elasticity of Demand Price elasticity of demand factors vary widely, depending the specific good or service and the consumers purchasing the specific good or service. Due to the varying factors, the estimates can also vary.

  1. Critically examine the differences between 'a change in demand' and 'a change in quantity ...

    Do you agree with the conclusion made in the quotation? Give reasons to support your answer. In recent years, the price of video recorders has come down but the quantity of them sold has dropped instead of going up. People conclude that this case has shown the Law of Demand is wrong and should be rejected.

  2. Factors affecting Supply and Demand.

    For example, a rise income leads consumers to buy more clothes. There are a few kinds of goods, fall in demand when income rises. Furthermore, changes in prices of other goods can also cause demand to change. When it happens, the two goods are substitutes.

  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. Business studies, product development

    a point for running the company this is because the company is a market orientated company. A market orientated company is a company that works only to make money instead of a company that does something to help others, eg.

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