Supply and demand are some of the significant economic issues which are highly regarded by an economist in an organization. The study will specifically look at how the different factors determine demand and supply of specific market goods and the intended market consequences
Discussion on the determinants of supply
Technology
Technology affects amount by promoting an efficient production process for products and services (Fugazza, 2004). The efficiency resulting from a technology-supported production system helps to reduce the costs production thus increasing the returns.
Based on the increased supply of goods from the technology support the production process, the supply curve will shift to the right. However, technology rarely goes down. It is, therefore likely that such a deterioration might occur and reduce supply.
The cost of inputs
An increase in the prices of inputs will increase the gain the expenses of production thus reducing the extent of realizable profits (Fugazza, 2004). On the contrary, a reduction in the prices of inputs will reduce the costs of production and increase the possible gains. Based on the objective of increasing profits, organizations will increase supply when the benefits go up and cut them when sales reduce.
An increase in the cost of goods will make the supply to go down, and the move will shift the supply curve to the left. Alternatively, a decrease in the price of goods will increase the amount, and the curve will change to the right.
Number of firms
An increase in the number of firms in the market will increase the supply of goods within that specific market (Fugazza, 2004). All the firms will be pushing their products with the main aims of growing sales and profitability.
An increase in the supply which arises from the increased number of firms will shift the supply curve to the right. Consequently, fewer firms will reduce supply and the curve will move to the left.
Discussion on the determinants of Demand
Buyers income
The buyer’s income will affect the demand for a product in different ways. For all the category of goods such as standard, complementary assets and substitutes, an increase in the income of a consumer will increase demand for products. More disposable income will give the buyer more purchasing power.
An increase in the income of the buyer will also lead to a rise in the demand for the goods, thereby shifting the demand curve to the right (Fugazza, 2004). When the buyer’s income reduces, the demand will decrease, and the curve will also be reduced.
Price expectations
Price expectations will also affect the demand for goods depending on the type of products. Complementary goods refer to those items whose consumption must be undertaken in conduction to other goods or simultaneously. Substitute, on the other hand, substitute goods always provide similar satisfaction to other existing products in the market.
There is an existing relationship between the demand for complementary goods and substitute goods (Fugazza, 2004). The main similarity is that the market for the above group of goods refers to the need to acquire a separate well from the current ones.
Since an increase in the price for most goods reduces the demand, the demand curve will move to the left.
Number of buyers
When the number of buyers increases within the market, the demand the goods will go up. The above phenomenon will always hold irrespective of the price changes. A high number of buyers will purchase high amounts of products per given unit.
Conclusion
In conclusion, there are many determinants of demand and supply. The different forces within the market such as the technology, cost of inputs and the number of firms within a specific area will affect the supply curved. On the other hand, the demand for goods is positively identified through different demands for the buyer’s income, the price expectations and the number of buyers.
Reference
Fugazza, M., (2004). Export performance and its determinants: Supply and demand constraints. New York: United Nations.
