Demand and Supply (Essay Sample)

Demand and Supply Student’s First Name, Middle Initial(s), Last Name Institutional Affiliation Course Number and Name Instructor’s Name and Title Assignment Due Date Demand and Supply In a competitive market, various factors such as taxes, subsidies, investment capacity, and changes in the cost of production affect supply. Separately, variables such as the prices of substitute or related goods, income, number of consumers, tastes, preferences, advertisements, and expectations of customers influence the demand for specific goods or services. In case there is a variation in either supply or demand, the equilibrium price and quantity are set to change. The events that cause alterations in demand and supply usually occur independently. In such instances, the impact may contribute to a rise in equilibrium price, accompanied by a fall in the equilibrium quantity. Alternatively, the change may lead to an increase in the equilibrium quantity and a decrease in the equilibrium price. In the presented hypothetical scenario, there is a decrease in the cost of production of Good X and an increase in the number of consumers who purchase the commodity. The first event, a decline in the expenses incurred when manufacturing the goods, will have a direct effect on supply. There will be an incentive for the producers to produce more goods and avail them to the market. The reason is that the firms will manage to increase the output due to the reduced operational expenses. In regards to an increase in the number of people who consume Good X, a direct effect on demand is expected. The implication of this phenomenon is that the producers may be motivated to hike the price since there will be numerous clients willing to buy the commodities. Since an increase in supply and demand for Good X are set to take place simultaneously, there are different outcomes that should be anticipated. First, if the growth in supply is equivalent to the expected surge in demand, the equilibrium quantity will rise while the equilibrium price will remain the same (see Chart 1). This is because there will be a proportionate shift in the demand and supply curves. Secondly, if the increase in demand surpasses the anticipated increase in supply, both the equilibrium quantity and price will tend to increase (see Chart 2). The reason for this is that the demand curve will shift rightwards. Such a change will be relative to the right shift of the supply curve. Finally, supply increases more than the rate at which the number of people willing to purchase a commodity, there will be a reduction in the equilibrium price while the the quantity will increase, as indicated in Chart 3. The rationale behind this is that the rightward shift of the supply curve will be greater than that of the demand curve, meaning the price will decline as the quantity increases. An example of an increase in the number of consumers buying a specific produc...