Microeconomics Class: Xbox One, Factors Influence (Essay Sample)

Xbox One
Name
Institution
Xbox One
Different products exist, and they are consumed on a daily basis depending on the consumer's preference. These choices are equally determined by the forces of demand and supply. Cocoa is my best product, and its awakening sense makes it my number one choice. However, the rate of my consumption is highly determined by the interplay of demand and supply waves in the market.
Demand for cocoa is affected by some market factors. First of all, the price of cocoa affects its consumption significantly. When the price is high, the demand for cocoa tends to slow down. On lowering the price, the demand increases dramatically. Secondly, the income level of a consumer determines his demand for the product (Mazzone, 2017). If the income is high, their purchasing ability increases which raise demand for cocoa. When the level drops, a decrease in demand for cocoa is witnessed due to reduced purchasing power. Increased competition from related products such as chocolate similarly will reduce the demand for cocoa if chocolate proves to be cheaper, healthier and harmless compared to cocoa. Likewise, a change in consumer preferences towards related products such as Nescafe and Milo will significantly reduce demand for cocoa.
The supply of the same product is also not spared by the market forces. Increase in the costs of production, for instance, leads to increased prices which decrease the rate of supply of cocoa. On the part of technology, improved and efficient technology in the production of cocoa will increase its supply. The increase is due to the increased and quick production of cocoa which creates surplus coupled with affordable prices (Baumol & Blinder, 2015). Availability of raw materials for making cocoa in terms of quantity is another factor that leads to increase in its supply. If the quantity of the materials is sufficient and their prices lower, the production will increase and subsequently shoot the quantity of cocoa supplied. On the same note, an increase in the price of the related products such as Nescafe will automatically lead to increased supply of cocoa, all factors remaining constant. The higher prices of Nescafe will reduce its supply and pave the way for cocoa supply which is affordable and serves the same function.
The graph below shows how changes in the demand and supply of cocoa affect the equlibrium price of this product. Note that the changes have been caused by the factors that I discussed above.The graphical explanation of these changes is very vital in understanding the whole concept of demand and supply.
A is the equilibrium price (eq), which is the intersection of the demand curve (DC) and supply curve (SC). P* and Q* is the equilibrium price and equilibrium quantity respectively. At Q*, the quantity that is demanded is the same to the supplied quantity. This means therefore that there is no excess supply or demand, making the equilibrium price to prevail. When the quantity supplied increases to P1C, the quantity demanded reduces to P1B. These changes lead to increase in equilibrium price from P* to P1, whereby the excess supply is created at BC. When the quantity supplied drops to P2D, the quantity demanded increases to P2E. This situation leads to excessive demand which leads to a decrease in equilibrium price to P2. In summary, a shortage in the demand of cocoa decrease equilibrium price to P2. Reversely, when the demand increases, the supply also increase causing the equilibrium price to shoot to P1.
On the issue of anticipated changes in the demand and supply of cocoa, there seems to be some truth on this argument. One of the primary reasons for this insight is the static nature of th...