Law of Demand Changes in Supply and Essay

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Law of Demand

Changes in supply and demand of goods and services lead to a shift in equilibrium. Business managers have to be seized of how market equilibrium is sought in order to make robust business decisions that can pay-off. Market equilibrium is attained when the quantity demanded by the consumers corresponds to the quantity that the firms are willing to supply bearing in mind that equilibrium is basically the price quantity pair where the quantity demanded corresponds to the quantity supplied (Vienneau, 2005). Business enterprises have to be aware of the nuances of the market equilibrium.

Economists postulate that other things held constant, an increase in price of a commodity will make the quantity of that commodity demanded to decline and vice-versa. The demand of a commodity is the amount of that commodity that is bought per unit time at a particular price. An individual will demand a specific commodity if he has a desire for the commodity; is endowed with sufficient resources with which to purchase the given commodity; is willing to spend the resources; and the availability of the given commodity at a certain price, place and time. Businesses take cognizance of the kinds of demands that their clients have. In that regard, there exist different kinds of demands notably: individual demand, market demand, income demand, cross demand and joint demand (Sullivan & Sheffrin, 2003).

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There are a number of factors that affect demand for a specific commodity and these include: prices of goods and services, income of consumers, prices of a related goods, the population of those using such commodities, the people's expectations about the future prices, the prevailing climatic factors and the distribution of the national income.

Equilibrium is likely to shift under circumstances where people change their preference from hamburgers to hot dogs. The hot dog business' equilibrium is also likely to shift if for instances the United States government strikes a deal with China where hot dogs are sold in China while egg rolls are imported by the United States from China. The demand for hot dogs are likely to be impacted by increase in the price of ground beef, the rise in minimum wage, the worker's industrial action, surging unemployment rates and the increase in price of buns as a result of wheat shortage. The price of the hot dogs is likely to determine the quantity that will be demanded. In price elasticity, the demand for hot dogs may be deemed elastic when the quantity of hot dogs demanded responds greatly to price changes (Sullivan & Sheffrin, 2003). When the quantity of hot dogs demanded responds little to price changes the price elasticity….....

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