Elasticity Of Supply And Demand

Supply and demand is an economic model that works to properly adjust the price of products in order to ensure profitability. Supply and demand change each other based on the needs and/or wants of the consumer(s). Without this vital model, economics itself would be crippled to the point of breakage. The actual existence of supply and demand has been around for longer than most people might think. In fact, the basic concept was written as far back as a fourteenth-century scholar named Ibn Taymiyyah. Taymiyyah wrote “If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down. The phrase “supply and demand” however, …show more content…
It is a major part of microeconomics where the quantity in demand is the same as the quantity in supply. This is represented by intersecting supply and demand curves. Equilibrium is necessary to be met in order to agree on the price for a product. Not only is there a balance to the model of supply and demand, there is also a degree to which the variables respond to one another. This is called elasticity. Elasticity is the measurement of how responsive an economic variable is to a change in another. For example, if a company lowers the price of a product, they then begin to wonder how much more of the product they will sell to make up for the price being lowered. There are two kinds of variables in elasticity, called elastic and inelastic variables. An elastic variable is one that changes more than it should when responding to changes in other variables. On the other hand, an inelastic variable is one that changes less than normal when it responds to other variable …show more content…
The second are the prices of related goods. This is how a product may affect a related product. For example, if the price of leather increases, the supply of leather jackets goes down, as the leather jacket company may not be able to afford as much leather to keep up the supply of jackets. Third is the condition of the production that makes the products. If there is a technological advancement in a good’s production, the supply increases. Fourth is the expectation for the product, which is the predictions that consumers can make that will affect supply. Fifth is the price of inputs, meaning that if the cost it takes to make something increases, the supply will decrease, as the producer will not be likely to produce something at a higher rate. Next to affect supply is the number of suppliers. As suppliers increase, products will increase in supply, decreasing the price. Lastly, are government policies and regulations. Government can enforce regulations and taxes to control the rate of supply and demand.
Next up is demand. The definition of demand is a buyer’s ability to pay a price for a quantity of a good or service. This refers to how much of a product or service is desired by buyers at various prices. There are also factors at work when it comes to the elasticity of demand. There are seven of these as well, with two generally being the same as the factors that