Many people think that economics is all about money. To some extend it is right . In a broad way it can be said that it is concerned with consumption and production. In another way it can be said that it is concerned with demand and supply. Demand is related to wants and wants are unlimited since it is based on the imagination of people. On the other hand supply is limited because it is related to resources. Demand and supply of products are always changing in the market depending upon price, taste of people, number and price of substituted products, number and price of complementary goods, income, distribution of income, expectation of future price changes etc. Demand and supply of certain products change easily and such products are called elastic products and demand and supply certain other products do not change easily and such products are called inelastic products. In both demand and supply if price alone changes there is only a movement of curve but if any factor other than price changes then the whole curve shifts.
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Here the attempt is to analyse, list, and elaborate the factors that will be affecting the demand of some products and supply of some other products and if the demand for and supply of those products increase or decrease in the next several years. Attempt is made to organize material with supporting evidence and diagrams are also given. Reference and Bibliography is attached at the end of the assignment.
I . As per law of demand there is an inverse relationship between price and demand. Law of demand say quantity of a good demanded per period of time will fall as price rises and will rise as price falls, other things being equal. The demand of certain products are analysed below and factors affecting demand is listed and elaborated with a forecast.
Economics, 6th Edition, Sloman , Page numbers, 54 and 61, price elasticity of demand, page 66.
(a)FACTERS AFFECTING DEMAND FOR CONVENIENCE FOOD
There are various convenience foods available in the market like pizza, pasta, burger etc. Here the market considered is U.K. Demand for convenience food is gradually increasing. Pizza is one of the favourite convenience food in UK and it is considered here as part of survey. In the year 2008 total sales of pizza in UK was £721 million. In 2009 it has grown by over 5% i.e. £750millioon. Main reason of this increase is because of promotional strategies of the manufacturers as well as the busy schedule of people especially working woman and aging population, increase in number of single-person household. They have no time to prepare conventional food items. Convenience food helps people to save much time. There is every possibility of increase in demand in future also irrespective of the fact that it is a junk food and it is not good for health. Majority of people are concerned mainly of convenience rather than health. This has helped the manufacturers to make much profit by making more sales.
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(b)FACTORS AFFECTING PRODUCTS PURCHASED ON INTERNET
In this modern period buying habit of consumers is drastically changing. Most people prefer to purchase online. Despite the economic down turn, online fashion market continues to boom. Online shopping is highly in demand among consumers and it is increasing day by day. Fashion market is the focus of study here. Even though there is a worldwide economic recession, online market is continually thriving. In 2008 in United Kingdom total online shopping of fashion product was £3.06 billion and there is a forecast that it will increase by 26%, that is £4.1billion in 2009. Various factors are there for increase in demand of online shopping, which include consumer's individual choice, which help them to find out lowest price, better product etc. People are becoming more and more fashion conscious but they have no time to go to any of the shops and search their individual choice. So they think that online purchase is more desirable. Even though the market considered here is United Kingdom the trend is more or less the same in the whole world. The market is still extremely dynamic with new internet launches by retailers such as Asda, T.K.Max, Matalan. Further launches are planned for 2009 and 2010, including Sainsburrys and Tesco. Existing retailers Asos.com and Johnlews.com are widening the product range as well. It can be analysed that in the coming years also this trend will continue to increase.
Always on Time
Marked to Standard
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(C)FACTORS AFFECTING DEMAND FOR FILMS AND CAMERA
The market for conventional film and camera sales is decreasing. Due to sophisticated technologies people prefer to use digital camera. So demand for conventional film and camera decreasing drastically. In United States market sale of film and camera was $3.4 billion in 2007. But the sale was decreased to $2.7billion in 2008. It is predicted that it will again decrease. Main reasons are availability of digital cameras at a reasonable rate and its convenience in use etc. If the camera with film is used there are lot of difficulties. It is much time consuming as well. Moreover the quality of picture is less in case of film camera compared to digital camera. With the use digital cameras umpteen numbers of photos can be taken at a time. But as far as digital camera is concerned there is limitation that is how many films are available.
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(d) FACTORS AFFECTING DEMAND FOR VIDEO RENTED FROM RETAIL OUTLETS
The demand of rental video is slowly decreasing. Indian market is considered here. In 2007 total revenue on rental video market was 1,140,000 crores but there was a decrease of demand of 9% in 2008, that is 10,133,34 crores. There are various factors affecting demand of rented videos. Main reason is the invention of online multimedia with the use of internet. It is very economical and anyone who has a little bit of knowledge of technology can view it with the use of internet. Moreover the attraction of internet is increasing especially among young generation. They don't want to go to any video shops and spend time for that. In addition to that, CDs are available at cheaper rates compared to old days. Easy availability of pirated copies are also a good reason. At the time of the release of the movie itself , the copies are available at a cheaper rate for purchase consumers will not look for rental. Government has taken some measures to control these malpractices but it has not done much help. So it can be concluded that rental video will continue to decrease.
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(e) FACTORS AFFECTING DEMAND FOR PAY PER VIEW TELEVISION PROGRAMMING
Demand for pay per view Television programme is increasing. Indian market is considered here. There are various reasons for this increase. They are as a result of strong subscription and advertising growth due to booming economy. India will double its television industry revenue and there is every possibility to overtake Japan. The whole Asian region itself is a revenue generating market for pay television broadcasters. India is going to become Asia's leading cable market by 2010 and it has become largest satellite market b 2008 and also the most efficient market for pay television market by2015. The demand for pay per view television programming is expected to increase in the coming years also.
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II. There is a direct relationship between price and quantity supplied. Higher the price, larger the quantity supplied keeping other things constant. The law of supply is demonstrated by an upward slop of the supply curve. Supply of certain products are analysed below and also the effect of these factors in the coming several years.
There are some determinants of supply which are given below.
1. Cost of production.
The higher the cost of production, the less profit will be made at any price. As cost rise firms will cut back production, probably switching to alternatives whose costs have not risen so much. Main reasons are as follows.
a, Change in input prices
b, Change in technology
c, Organizational changes
d, Government policy
2. Profitability of alternative products (substitutes in supply)
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Other goods are likely to become more profitable if-
a, their price rises
b, their cost of production fall
3. The profitability of goods in joint supply. Eg. Refining crude oil to produce petrol
4. Nature, random stocks and other unpredictable events (weather or diseases)
5. Aims of producers- Profit maximising firm will supply a different quantity from a firm that has a different aim, such as maximising sale
6. Expectations of future prices.
7. Number of suppliers- If a new firm enter into market, supply is likely to increase
(f)FACTORS AFFECTING SUPPLY OF CRUDE OIL
Crude oil prices always increases due to overheated demand in the industrialized and developing world and lot of international factors like Gulf war, U.S Iran tension, organization of petroleum exporting Countries(OPEC),micromanaging supply etc. So also entities such as governments or cartels can artificially reduce supply through nationalising oil, cutting back on production, limiting drilling rights, imposing tax etc. International sanctions, corruptions, military conflicts can also reduce supply. In 2006 total production was 73.46 million barrels per day. But in 2007 it was decreased to 73.01 and it is expected that it will continue to decrease.
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(g)FACTORS AFFECTING SUPPLY OF HOTEL ROOMS
Demand for hotel rooms in United Kingdom is increasing every year. There will be a demand for 36,000 hotel rooms extra for a period from 2009-2016. This shows that supply of hotel rooms will increase in the coming years. Factors like better marketing and promotion of truism sector, 2012 Olympics etc contributes to the increased supply. United Kingdom is one of the biggest tourist destinations of travellers. Moreover so many students are coming to United Kingdom for higher studies from different parts of the world for good education and for exposure also. Liberal policy of the government also attracted foreign students to come do education here. All these things make the landlords and real estate people to supply more hotel rooms.
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(h)FACTORS AFFECTING SUPPLY OF FAST FOOD OUTLETS IN EMERGING MARKETS
Fast food is one of the world's largest growing food type. Market considered here is India. India's fast food industry is growing by 40% a year. In 2007 there was a sale of $70 billion in India. In 2008 it has increased to $98 billion. The reasons for increased supply was because of increasing number of working woman, customer sophistication and confidence lack of time, double income group, larger population, relaxation in rules and regulations, more diversification etc. In future it is expected that supply will increase more and more. As far as India is concerned its economy is gradually increasing. It is one of the countries which had not been much affected by economic recession. So it can be assumed that the income of people will increase further in future and their purchasing power will also increase .So there is no doubt that in the coming several years fast food giants will concentrate in emerging market like India, China, Brazil etc. so that they can reap the benefits of economic growth in those countries and they will increase their opening up of outlets in these emerging markets.
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(i)FACTORS AFFECTING SUPPLY OF CREDIT CARDS
Growth in consumer credit cards has been one of the most important and controversial forces behind the UK economies and sustained expansion during the past decade. During the period2000-2005, the value of transaction conducted using credit cards grew from £171.2 billion to £347.2 billion. The average annual growth rate was 15.3%. People prefer to purchase credit card is because it is convenient for them to make transactions and they need not take money with them. They find it very difficult to carry money with them. Since more and more demand for credit cards and s it will increase profit of the banks they will supply it more. Moreover credit card debt in United Kingdom fell by 49 billion pounds in 2008 and this has encouraged the banks to supply more credit cards in the years to come also.
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(j)FACTORS AFFECTING SUPPLY OF LAPTOPS
Market in India is taken for consideration here. In India laptop market is in boom. A change in working styles and the need for access to information is pushing laptop sales to great heights. With the use of laptop and internet a person can get all information on his finger tips. This is information age and if a person does not use computer and internet he will definitely fall behind and youngsters are well aware of this. In 2005-2006 sales of laptop was 3,50,000 units . This was mainly due to affordability or reduction in prices. In 2007 total sales was 5,00,000 which is more than 90% growth. It will again increase since technology will again improve. So it can be estimated that there will be increase in supply of laptops. Moreover it can also be seen that most of the computer sales was among younger generation that is between age group of 18 to 36
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BIBLIOGRAPHY AND REFERENCES
1. Economics 6th Edition Sloman
2. Economic, S.J.Grant
3. Essentials of Economics, John Sloman
4. Economics, Parkin, Powel,Mathews