Introduction To Supply and Demand in Economics

accession To Supply and requisite in EconomicsIntroduction to direct Supply gibe to one of the microeconomic text edition from Oxford deal affix is the basis of economic of pricing that the charges ar determined using the engage and cede invention. In other words, the charter and bring home the bacon system is to represent the dependence of deal and sum on harm. rentThis session is the definition of what is lease in economics. Joseph and Kamil (1996) stated that necessary is the tramp at which consumers loss to buy a ingathering. There is difference mingled with demand and want, fit in to Oxford microeconomics textbook (2008, p.28) want is meant to have a desire or a wish for some thing while demand is the desire or need of customers for betters and go which they want to buy or use. When the product bell that is high in the market, the demand testament be low. When the product equipment casualty is low in the market then the demand pull up stakes be h igh as many consumers leave alone be able to purchase the product if the product expenditure is low.Law of DemandLaw of demand is to explain that when higher(prenominal)(prenominal)(prenominal) the hurt of a respectable, the lower is the beat demanded for that trade good. When the worth is lower down, the amount of money demanded is higher. Besides that, faithfulness of demand also explains thither leave behind be a proscribe or an inverse kin between charge and quantity demanded.Oxford microeconomics textbook (2008, p.28) stated that e genuinely individual and society practices the fairness of demand. pots go forth always buy more goods when the goods of the price is reduced. For example pack completelyow for definitely buy more goods in a mega gross revenue confirm to the normal season of the sale. This statement base clearly relates to on October 2, 2014 administration tilt magnitude the gas and diesel engine motor motor price by 20 cent per liter as i n bankers bill with the federal governments bounty rationalization policy. The new retail price of RON95 bequeath be RM2.30 and diesel leave behind be RM2.20 per liter. When government increase the petrol and diesel price by 20 cent, definitely at that place are a traffic circle of Malaysian consumers struggle with the price of it.Determinants of DemandDeterminants of demand jakes buoy be getd as when there is multifariousnesss in price, quantity demanded will depart. It is a movement along the same demand persuade and when the factors other than price win overs, demand curve will shift. Below are the information of the determinants of demand.Income Income is pose as the rise of the individuals income will hotshot to an increase of demand it is be name income of a consumer can influence the purchasing decision of an individual. Rise of income will lead individual demand for more goods and overhauls much(prenominal) as houses, cars and others. even-tempered when t here is income unfavorable, definitely it will lead individuals to decrease their demand.Tastes and fashions Changes in tastes and fashions of consumers can change significantly the demand for goods and ser ungodlinesss.Population or number of buyers Demand of goods and serve are all depends on the size of the state of buyers in the market. If there is a large population with a high rate of growth creates greater demand for the goods and services.Expectation The event that consumer expect in the future will also give a impact on the demand it is because the higher the expected future price of a good, the on-line(prenominal) demand for that good will be higher and vice versa. publicizing Goods that have advertizing are normally goods with high demand. It needed the advertisement to create the alertness and attract the consumer to buy the goods and services when they are aware of the personifyence of the goods.Price of link up goods This to explain that demand for a good is nec essitateed by the changes in price of tie in goods. There are two categories which are substitute goods and complementary goods. Substitute goods Substitute goods is define as the goods can be replace by another goods. For example, cocoa and tea, chicken and pork and many others goods that can find a sympathetic replacement. Complementary goods Complementary goods are those goods that are used in articulation with another goodSupplyMatt Johnson (2014) define tag on as the step quantity of a product or service that the food market can offer. The quantity supplied is the total of a product or service that the suppliers will be translate willingly with a given price. harmonize to Oxford microeconomics textbook (2008, p.40) cede is defined as the ability and willingness to stag a specific quantities of the goods in a given period of time at particular price, everything else held constant.Law of SupplyUnder Oxford microeconomics textbook (2008, p.41) stated some other thing s being equal, law of picture states that higher the price of a good, higher is the quantity supplied for that good and lower the price, lower the quantity supplied. It is stated that the law of add together is a positive or a direct relationship between the price and the quantity that is supplied. Goods that sold by the vender will want to gain more profit, thats why goods are normally sell more at a higher price.Determinants of SupplyDeterminants of supply can be define as when there is factors and price of the good is constant, there will be change in supply. Below are the factors and how it can shift the supply curve.Cost of ware The change of supply will response to the factor of production such as labour, capital or land. The resource for production increased therefore cost of production will increase as well, thus it reduce the supply of the good.Price of related goods Supply will be influenced by the prices of related goods such as substitute goods and complementary good s. When there is price increase of the substitute goods in product, the supply of the goods will decrease and vice versa.Expectation of seller When the seller are expecting a higher price of the good in future, the supply will be refineder as for the goods and vice versa.Technological onward motion The technologies improvement have been the most of import influence on the supply due to the innovations in technologies enable the producers to use fewer factors of product that will lower down the cost of product and therefore the supply will increase.Number of sellers If the firms of supplying goods is growing large, then the larger the supply of the goods and vice versa. brass policies Supply of the good will be affected if there is any implementation rules by various government policies such as taxes and subsidies. When the government imposed sales tax definitely it will caused higher cost of product and thus the supply will decrease.Government increased the price of petrol and di esel increasedThis is the case study that shows on 2nd October 2014, government have increased the price of petrol and diesel to 20 cents per liter as in line with the federal governments subsidy rationalization policy. The new retail price of RON95 will be RM2.30 and diesel for RM2.20 per liter. The assignment will now explains how does the changes will affect the demand and supply on Malaysian consumers.The demand of petrolAs law of demand already explained determinants of demand can be define as when there is changes in price, quantity demanded will change. When government increase the price of petrol and diesel, definitely the demand towards petrol will decrease as it determinates the income of consumers is affected. gun price plays a big quality towards the market, when price of petrol increase which means the market or society will be liner the increase of inflation. Inflation occurs when petrol price increase it is because production line will need to increase their prices as well to cover up the petrol cost by delivering the products.According to a statement from DAP Malaysia, The government must realize that allowing the increase of evoke prices will create two- prong negative impacts. Firstly, it will cost more for car users and this will definitely affect a large section of the consumers, as a big population of Malaysian society owns a car. Furthermore, the price hike in burn down will have cascading effects and lead to increase of prices of other goods and services and thus contributing to inflation in our economy.Secondly, the higher cost of fuel will increase the overall operating cost of doing business in Malaysia.The supply of petrolSupply of petrol will not be a problem in Malaysia although the government increased the price of petrol. People will still need to have petrol for their cars. Therefore the supply of petrol will remain stable as there is a statement from the PKR secretary general Because the people are still pay prices higher than the market prices for unsubsidized fuel.The demand and supply curve for petrolThe represent above is the demand and supply curve of the petrol as the demand of petrol will decrease as government do not make any changes for the petrol price. Kindly refer on a lower floor for the symbolism terms.S = SupplyD = DemandP 0 1 = Price equilibriumQ 0 1 = Quantities demandedThe demand of dieselGovernment also increase the diesel price for 20 cent per liter, the total amount of diesel is now RM2.20. The demand of diesel is same with the demand of petrol, price increase and demand will decrease eventually. The only thing that affected by the price of diesel is the production from the manufacturers as they will need to increase the price of production to cover up the production cost.The supply of dieselThe supply of diesel will be avow the same as the supply of petrol, government will not cheek problem in Malaysia although the government increased the price of diesel. Manufacturers wi ll still needed diesel for production cost, therefore the total damage will only bare by consumers.The demand and supply curve for dieselThe graph above is the demand and supply curve of the petrol as the demand of diesel will decrease as government do not make any changes for the diesel price. Kindly refer under for the symbol terms.S = SupplyD = DemandP 0 1 = Price equilibriumQ 0 1 = Quantities demandedConclusion for price of increasing petrol and dieselAfter the knowing of the effect of increasing petrol and diesel, Malaysia government should consider decreasing the price to a well-founded price where consumers are able to afford the price. Price of petrol and diesel increase will cause the inflation rate increase in Malaysia. Malaysia is needed to be remained competitive in the eyes of foreign investors.Introduction to grab livelyity in economics is important because it is a important concept to be mastered in order to apply the concept to the households, businesses and res earchers as it is vital and very applicable in the daily life. catch is the measurement of the magnitude of responsiveness of any variable such as quantity demanded or quantity supplied to the change to the determinants factor such as price and income. According to Oxford microeconomics textbook (2008, p.87) the hold dear of breeze can be measure by the graph belowTypes of piece of cakeBelow are the table of the types of crackPrice Elasticity of DemandThe price of ginger nut of demand is to measure on how much the quantity demanded of a good responds to a change in price of the good. According to Economics Online, price elasticity of demand shows the relationship between price and quantity demanded and provides a precise calculation of the effect of a change in price on the quantity demanded.To calculate the price elasticity of demand between two points on a demand curve, we will need a formula to calculate. Refer the graph below for the formula of calculating price elasticity of demand.There are also 5 types of the demand curve exist in price elasticity of demand that shown in Oxford microeconomics textbook (2008, p.89). dead Inelastic Demand Elasticity = 0 which defines as regardless of the price, the quantity of demand will remain the same.Inelastic Demand = social unit Elastic Demand = 1 which defines as the quantity demanded moves the same amount as the price moves.Elastic Demand 1 which defines the quantity demanded moves pro rata more than the price.Perfectly Elastic = Infinity which defines when there is a teentsy change in the price will lead to the huge change of the quantity demanded/Price Elasticity of SupplyThe price elasticity of supply is the measurement on how much the quantity that supplied for the good responds to a change in the price of the good that computed as the percentage change in quantity that is supplied divided by the percentage of changes in price.To calculate the price elasticity of supply between two points on a suppl y curve, we will need a formula to calculate. Refer the graph below for the formula of calculating price elasticity of supply.Price elasticity of supply =There are also 5 types of the supply curve exist in price elasticity of supply that shown in Oxford microeconomics textbook (2008, p.95).Elastic 1 defines as the quantity supplied moves proportionately more than the price.Inelastic building block Elastic = 1 defines as the quantity supplied moves at the same amount as the price moves.Perfectly inelastic = 0 define as the regardless of the price, the quantity of the supply will remain the samePerfectly elastic = infinity define as when there is a small change in the price will lead to the huge changes in the quantity supplied.Cross Elasticity of SupplyCross elasticity of supply is the measurement on how much the quantity demanded of a good responds to a change in the price of another good where it will computed as the percentage change in quantity demanded of goods A divided by th e percentage change in the price of goods B.Below is the formula of bumble price elasticityCross price elasticity of demand =According to the statement of economics export (Mike Mofatt, 2015) The cross-price elasticity of demand is used to chit-chat how sensitive the demand for a good is to a price change of another good. The high positive of the cross price elasticity will let us know that if the price of the good goes up and the demand for the other good goes up as well. A negative tells us just the opposite, that an increase in the price of one good causes a drop in the demand for the other good. A small value (either negative or positive) tells us that there is light relation between the two goods.Below are the interpretation of the degree of elasticityGoods 1 2 commentary Both goods are require to be paired up and relatedExample Pizza Coke, A good pizza store that serves great pizza will generates demand for the drinks as well.Goods 1 2 0 = Goods 1 2 are substitute go odsDefinition They are substitutes goods when there is price increase on the good and cause the demand increase for the good of others.Example Replacing an iPhone 6 with a Samsung Note 4 will be better than replacing the iPhone 6 with a Samsung tablet.Goods 1 2 = 0 = Goods are not related goodsDefinition The price of the good will not affect the demand for another good.Example Ferrari, even if the price increase it will not related to the demand for another good. It has its own target market.Income Elasticity of DemandIncome elasticity of demand is define as the measurement of how much the quantity demanded of the good responds to the changes of consumer income and computed as the percentage of change in quantity demanded divided by the percentage change in income.Below is the calculation of income elasticityIncome elasticity of demand =According to the statement of economics export (Mike Mofatt, 2015) Income elasticity of demand is used to see how sensitive the demand for a good i s to an income change. When there is high income elasticity, it will be sensitive to the demand for a good is to income changes. A very high income elasticity shows that the consumers income goes up and consumers will buy a great deal more of that good. A very low price elasticity implies just the opposite, that changes in a consumers income has little influence on demand.Below are the interpretation of the coefficient of income elasticityCoefficient of Income ElasticityDegree of ElasticityTypes of GoodEy = 0Perfectly Inelastic necessary goodsEy 0ElasticLuxury goods0 InelasticNormal goodsEy ostracise elasticInferior goodsTable 1 Oxford microeconomics (2008, p.94)Conclusion for elasticityWith all the research that has been done, elasticity do play a important role in economics with the measurement of responsiveness towards one determinant to the change in one of the determinants factor.Conclusion and recommendationWith the research of doing this assignment I get to learn about the signs of useful economics information such as demand supply, law of demand supply, determinants of demand supply. Each of the characteristic of the economics information also will determine the usefulness.Through this assignment, I have know about the information of elasticity. There are four-spot types of elasticity such as price elasticity of demand, price elasticity of supply, cross price elasticity income elasticity. I also learnt to how to draw assorted types of demand curve.