Economic Concepts in the World (Reaction Paper Sample)

Economic Concepts in the World
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Economic Concepts in the World
Demand and supply interact and provide market dynamics relative to the consumers' requirements and demands. However, there are instances where demand is driven by external aspects other than consumer needs, such as price or market domination. This paper seeks to review the expression of specific economic concepts in the real world, providing insight into each, and exemplifying their effects. This paper focuses on five economic concepts, price elasticity of demand, price elasticity of supply, monopoly, oligopoly, and price discrimination. The effects of these concepts are felt on consumer capability, product supply, invention, competition, and the consumer demand.
Price elasticity of demand refers to the measure in response to price changes on the demand of a commodity or a service. Generally, demand explains the willingness to purchase by consumers. This willingness is often associated with and relative to the cost of a product or service. This concept is usually positive for Veblen and Giffen goods (Tucker, 2013). According to Rapier (2020), the oil industry and the automobile industry have a complementary relationship with regard to price elasticity. While this relationship is often positive, the global pandemic has resulted in reduced use of vehicles due to movement restrictions, and with it reduced oil demands. This reduction in demand, estimated at 3.8 million barrels daily, has resulted in a 30% drop in crude oil prices, and a slowed supply of the product (Rapier, 2020). This relationship is evident for complementary goods where the rise in demand for one results increased demand and vice versa.
On the other hand, price elasticity of supply defines the response of supply of a commodity or service relative to changes in its price. As a rule of thumb, when demand and price rise, producers and suppliers react with increased supply. Nicas, (2020) provides an example of price elasticity of demand for personal protective clothing essential during the COVID-19 pandemic. According to the article, global demand for face masks that are needed as a preventive measure against the disease, led to an acute shortage that resulted in increased prices. This rise in price not only motivated producer to meet the insatiable global demand but also resulted in the entry of new players. However, not all the dealers and suppliers were intent on standard quality, with unscrupulous dealers subverting this necessity. Regardless, the demand of this new necessity remains on a steady rise, common for essential inelastic products and services that meet a basic need. For these services and products, changes in price have relatively little or no effect on demand but may cause increased supply (Tucker, 2013).
With regard to supply and demand, monopolies present the concept of a market structure where a single producer or seller boasts a unique product. This unique nature shields the producer from competition, ensuring they enjoy total market control. Such producers set prices as they see fit and also exclude or impede the entry of competitors (Tucker, 2013). Such market structures result in buyouts for smaller players and complete control of new inventions in the sphere (Shubber, 2020). According to Shubber (2020), some of these buyouts may be indiscriminate of the competitive capability of the smaller companies and result in slowing the rate of technological development. Sitaraman, (2020) presents the open need to contain this control, but Big Tech argue that their dominance as an answer for Chinese advancements and political donations.
Besides, monopolies, market dominance can be exerted under oligopolies. One such structure would be the automobile industry, with GMC, Ford, Chrysler, Toyota, BMW, VW, and Honda having a robust market control globally and locally in the USA. According to Dow (2020), this control is visible through the use of car dealerships as a point of sale as well as barriers to electric vehicle technology. The article presents Tesla’s pioneering direct sales strategy and vehicle propulsion system and the marketing challenges they faced. Tesla’s threat to the status quo was met by decade’s long requirements for them to use dealerships, whose sales personnel had little to no understanding of their technology. However, Tesla was able to get a win in Colorado and has its sights set on more states, all the while engineering methods to meet client deliveries. This predominance and ability to infringe on Tesla by established vehicle companies is representative of oligopoly (Dow, 2020).
Finally, the concept is the pink tax presents a viable example of price discrimination. Applicable generally to women, the pink tax refers to the practice of suppliers charging women higher prices for similar products and services. According Hoffman (2020) and Morton, (2020) girls' toys cost 13% more than boys' toys, while female shirts cost 15% more than men's shirts. In addition, women got charged $3-4 more than men when accessing dry cleaning services. Besides these scenarios, these authors present the exploitation of women by vehicle repair shops that prey on their lack of information on the services