The way a consumer responds to price changes in services or products determines how well the product or service sells. If demand is high the product or service will more than likely sell if supply is adequate and the price is desirable.
Beef and Eggs Supply, demand, and price controls determine how much of a product is available, how in demand the product is with consumers, and at what price consumers are willing to pay for a certain product or service. Demand is defined as the amount of a product or service that a consumer is willing and able to buy at different prices in a time period. Supply, on the other hand, provides the amount of such products and services that their producers are willing and able to product and make available for sale at certain prices in a period of time. Price controls are put onto products or services to restrain from price inflations (McConnell & Brue, 2005). Supply, demand, and price controls interact with each other in different ways and affect the equilibrium price of products such as eggs. When eggs are in demand, it means that consumers are willing and able to purchase eggs at a specific price. However, as the prices of eggs increase, the demand for eggs begins to drop and suppliers find that there is a surplus of eggs that will not be consumed. To avoid a surplus in eggs, suppliers need to find the equilibrium price that consumers will consume just the right amount of eggs so that there is no surplus of eggs and fulfilling the demand of eggs so that each consumer who wants eggs can purchase them. In connection with the supply, demand, and price controls on eggs, even with significant increases or decreases in price, eggs have no substitute other than artificial egg substitutes, which are more expensive than a dozen eggs. Since there is no substitute, the demand for eggs is inelastic to that of say beef (McConnell & Brue, 2005). Beef is an elastic product, unlike eggs. Since eggs have no other substitution than artificial ones, such as egg beaters, changes to the price of eggs do not affect their supply or demand. On the other hand, beef is a very elastic product. There are many substitutes for beef, such as pork and poultry, so as the price of beef rises, the demand for beef falls and instead the demand for pork or poultry rises. This makes beef a more elastic product than that of eggs (McConnell & Brue, 2005).
Pepsi and Coca-Cola Pepsi and Coca-Cola are very similar products, both being carbonated drinks and can easily be substituted for the other. So if the price of Pepsi has doubled, more consumers would purchase Coca-Cola and less Pepsi (McConnell & Brue, 2005). If however, there had been no change in the price of either product, but consumer’s income is reduced to 30%, then both products may see a decline in demand. With a decrease in income, fewer consumers can afford to purchase the product, so the demand for the product will reduce (McConnell & Brue, 2005). On the other