DEMAND AND SUPPLY

Demand and supply of Water bottles

Demand and supply of Water bottles

Introduction

Pricing in the market develops, depending on supply and demand - the main economic levers of a market economy. By its sheer nature, the market economy is unstable and is in constant motion. From the microeconomic point of view of the definitions of the market, the most appropriate is the following: the market - a mechanism of interaction between buyers and sellers, in other words, the ratio of supply and demand (Opocher, Steedman, 2009, pp. 937-940).

In economics, there is a very effective tool to explain these and many other changes in the economic environment. It is called the theory of supply and demand. This theory shows how consumers' preferences determine the demand for goods, while the costs of enterprises are the basis for supply of goods. If, for example, notice that the prices of oil fell, then the explanation is either in the fall of demand, either in the growth of its proposal. The same is true for each market, ranging from computers, diamonds, and ending with the land: changes in supply and demand lead to changes in output and prices (Opocher, Steedman, 2009, pp. 937-940).

The concept of supply and demand shows how they operate in competitive markets with respect to personal goods (goods and services). First, we consider the demand curve, then the supply curve. Using these basic concepts, we will see how to determine market prices, or how they reach their competitive equilibrium in a place where the two curves intersect and where the forces of supply and demand are in balance. It is the movement of prices - the price mechanism, balances or lead to equilibrium of supply and demand (Opocher, Steedman, 2009, pp. 937-940).

Discussion

Use an appropriate diagram to analyze the effects on the market equilibrium price and quantity traded for bottled water following

(a) A fall in the price of bottled water

Demand depends on the purchase price: the higher the price rises, the demand decreases, it is said to feature "decreasing" its price. Demand is elastic with respect to price. This elasticity denoted by "e" and ask price. It equals the relative change in quantity demanded to changes reported on the prize (Paul, 2000, pp. 18).

Application / Price = Rate of change of the Application / Percentage change in price.

More elasticity is near zero demand is more rigid compared to the price the more it moves away the more demand is "elastic" with respect to price. The coefficient of direct elasticity of demand is the ratio of the relative change in quantity demanded to the relative price change. It shows the percentage varies the amount of demand for the product when its price by 1%. Therefore, it can be said that a fall in the price of bottled water will lead to an increase in the demand for the bottled water (Paul, 2000, pp. 18).

(b) An accident which poisons the local pure water supply

The supply represents the quantity of goods or services that a ...