Shifts in Supply and Demand handout example

Shifts in Supply and Demand handout example

To elaborate the article, I will take example of consumer Product say tooth paste, Colgate, priced at ₹140 for 200gm tube.

Lets explain factors affecting demand and supply with examples------

# Factors affecting demand------

* Suppose, at the price of ₹140, the demand for colgate is 20000 tubes ,if price increased by 10% , the demand for colgate will fall. It is called price effect.

* At present, average income of buyers in a locality is ₹20000 per month ,but now it increases to ₹25000, now the demand for toothpaste will increase, though price remains ₹140.It is called Income effect.

* Lets take example of Ripped jeans( torn jeans).As these jeans are in trends ,these days ,people will start buying it more, though its prices are not fallen and even these are increased. It is called Change in fashion.

* Again taking example of tooth paste, suppose there is also an another toothpaste, pepsodent priced at ₹155. Suppose price of pepsodent is reduced by company, now at ₹135 per 200gm tube. Now, more people will move towards pepsodent as both are substitutes which can be used in place of other

It is called Change in the price of substitute good.

* One more example ,suppose price of printer ink has risen, from ₹200 to ₹280 ,now it will affect the demand for printers because ,the printing will get costly now ,and people will reduce buying printing machine. Without ink, printer can not work. It is called change in price of complementary goods.

* Suppose customers feel that the he price of gold is having upward trend ,these are selling at ₹41000 per 10 gm ,but in future it can touch ₹45000 per gm ,they will start buying it ,this is called future expectation of price

*Usually we get attracted by ads in TVs, if there is an attractive model (say, Kareena kapoor)using Dove soap, people will start buying this soap more. It is due to Advertisement effect.

*During excessive heat, there is much demand for air-conditioners ,sellers sell it like hot cakes ,charging high prices ,and people are also ready to buy, it is case of seasonal demand of goods

* Imagine ,a lot of people have shifted in our locality ,now the demand for consumer products will increase ,though there is no change in price ,it is due to new consumers in the market

* My mother had nadal infection, so she needed Nebulizer at any cost, I bought it for her from nearby drug store even if i knew he charged extra money from me, it is due to the factor Need of the consumer.

#Factors affecting supply-------

* Suppose firm is selling sweatshirts priced @750 per piece.

Now it increases price @800, the firm will be willing to supply more at new price. It is Price effect.

*Suppose yarn used in making sweatshirts is costly as its price increases by 20% ,now the seller will reduce supply of shirts .It is called change in input price.

*Suppose govt has imposed excise duty on yarn, it will make cost of production high and reduced profit margin .Now the seller will reduce supply of sweatshirts .It is due to Unfavorable govt policy.

*This year, due to heavy rain, the produce of potato was destroyed, now the producers will have to reduce its supply. It is due to Natural conditions.

*In my area, roads are in bad condition, so producers firms in my region cannot supply their produce to each area, it is due to the Transport conditions.

*Firm producing winter jackets ,is expecting heavy snowfall in month of February ,so it will sell jackets at higher prices in feb and reduce its supply right now. It is due to the factor Supplier's expectation of future demand.

*In my area ,there is increase in population due to immigration policy of govt. Now, the sellers will supply more as per the increased demand. It is due to change in the number of consumers in the market.

*Sellers often increase or decrease the supply as per the need of consumer, it is due to the factor Changing needs of consumers.

*Suppose the seller of tea observes that there is a rise in the price of coffee from 200 ₹ to ₹240 ,he will reduce the supply of tea and will start selling coffee. It is due to change in the price of substitute good.

*If price of meat increases, it will increase the price of leather also, it is due to the Joint Products.

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