DEMAND ESTIMATION OF TEA

Demand Estimation of Tea

Demand Estimation of Tea

Introduction

The study relates to the demand estimation of tea which further includes price of beer, fruit and vegetables; meat and fish; coffee, wine, travel tea, leisure and also income. The study will help in developing the model for demand, price and income which will further facilitate in knowing the trend of demand, price and income tea.

Literature Review

The demand curve shows the quantity of a good that buyers are willing to buy at a certain price. Aware that this is a theoretical argument and not about what buyers actually is - but only what they are willing to trade. The demand curve applies only if you hold everything else equal, that is, that other things affecting demand are held constant (Flath, Nariu, 2000, 397-403). Other factors affecting demand include the buyers' income and preferences, prices of other goods that can replace, substitute, the product demand curve applies (Andreyeva, Long, Brownell, 2010, 216-22).

The price is set on the y-axis and quantity on the x-axis, which means that the curve slopes downwards. A lower price leads to the willingness to buy a larger quantity (Voith, 2001, 33-40). Demand is defined for a specific time period. Moreover, the supply curve shows the quantity of goods that sellers are willing to sell at different prices. It usually points upward (but not always) because a higher price means that sellers are willing to produce a larger quantity (Field, Pagoulatos, 1997, 118-129).

If the demand curve and supply curve are merged then equilibrium will exists. The equilibrium position is the quantity demanded equal to quantity asked. If the supply and demand for a product is in equilibrium point is the situation stable (Diss, 2007, 153). There is no greater endeavor that we move from there. There is a self-correcting factor that constantly strives towards equilibrium point. Imagine the price p2 is higher than the equilibrium price (Canina, Walsh, Enz, 2003, 29-37). Here are buyers willing to trade quantity Q2 while sellers are willing to produce quantity Q1. We will have a surplus of goods and for the sellers to get rid of excess lowers the price. The price is thus approaching the equilibrium point. If the price p3 is below the equilibrium price, there is a shortage of goods. Buyers are willing to trade volume Q3 while sellers only want to produce the quantity Q4. The result is that buyers are willing to pay more to get access to the goods and the price rises while the sellers begin to produce a greater quantity then we can approach the equilibrium point (Tian, Liu, 2011, 31).

An economic model for the price of a product is related to the demand and the offered quantity of product in a market. It is customary to assume that the more expensive a product is, the less demand for it and the more producers offering (Moodie, 1999, 151-162). The price when quantity demanded coincides with asked out quantity is called the equilibrium price, and means that ...