Microeconomics: Supply and Demand and Demand Curve Essay

Submitted By clary910
Words: 2843
Pages: 12

Supply and Demand of the Market In the society we live in today there are many different outcomes in profit of firms and households based on how they manage their prices used in their businesses. A variety of factors influence the economy of this country such as demand, supply, or the income of the buyers. These few factors would either increase the profit of many businesses in the United States or decrease depending on how they shift. Also, based on that, there would be an effect on surplus of products when there is a shift in market supply which is supported by a change in the prices of outputs, prices of substitutes in production, number of firms in the market, expected future prices and technological change. (Hubbard and O'Brien ) A decrease in demand would affect many businesses and is supported by the change of income, of price of related goods, in tastes, in population and demographics, and of expected future prices.
First of all, the supply of a product is determined by many things such as the law of supply. This law states that with holding everything constant, an increase in the price increases the quantity supplied, and when the price decreases, the quantity supplied decreases which would be the amount of a good that a firm is able and would supply at a certain price.( Hubbard and O’Brien) For instance, if the supply schedule shows how the increase in the price of a towel increases, the quantity of the product supplied then will also increase. This is what would be shown in the supply curve of a certain product, such as the towel. When the firm increases the quantity of that product that they want to sell at a given price then the supply curve shifts to the right meaning the supply increased. If they want to decrease the quantity of this product at the same price then the supply curve will shift to the left meaning that the supply decreased.
One thing that could shift the market supply and have an effect on the prices of products is the price of inputs. The price of inputs is the the amount of money it takes to pay for anything used in the fabrication of a good. For example, if to make a towel the cotton used to produce that towel starts to increase, then the price of making that towel increases. When this happens the supply could lower because it takes more money to create a certain amount of towels; therefore, the market supply curve moves to the left. However, if the price of the cotton used to make that towel decreases then it would take less money to produce which could increase the supply of this product, and move the supply curve to the right. The price of inputs would affect the supply curve whether it would shift to the right or to the left because of the price increase it takes to produce the good.
Another variable that changes the supply is the technological change which would be a positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs. If the firm wants to have a positive technological change they would have to produce more outputs while having the same inputs which would occur from the productivity of workers or machinery.(Hubbard and O’Brien) For instance, when factory workers are more productive and getting paid the same more output would be produced having a positive technological change and a shift of the supply curve is towards the right. If the productivity of the workers decreases and they are getting paid the same, then the technological change is negative; therefore, the supply curve will shift towards the left. This is what happens to the supply when the productivity of the workers changes and are still paid a constant amount.
These variables are what change the supply, including the change in price of a substitute in production which would be the change in price of an alternative product. For example, some companies may not just have one product to sell; they have the backup product that could still help them gain a…