Demand and Supply Utilities (Research Paper Sample)

Demand and supply utilities
Name
Course
Institution
Causes of shifts in supply and demand curves
Causes of shifts in supply curve
Various issues cause shifts in the supply curve depending on their effects upon the ongoing market prices. Such issues are the type of competition in the market whether, monopoly, monopolistic, oligopoly, and perfect competition. Further, the price of goods shall impose shifts in the supply curve since manufacturers produce more quantity of products when the prices are higher and reduced quantity when the market prices slump down (Boyes, & Melvin, 2013). Therefore, the supply curve shifts downwards or upwards when the present factors in the market seem to challenge the imposed prices to reduce or increase accordingly.
Causes of shifts in demand curve
Economists stipulate that increase and decrease in the quantity of a product demanded depends on the unit price imposed thus; the demand curve will shift upwards from the right towards the left at reduced prices, while it would reflect backward slumps at increased unit prices. Further, changes in per capita incomes and shifts in the prices for substitute commodities also influence a positive or negative shift in the demand curve. Demand shifts may also occur in the event of varied tastes and preferences, different expectations, and standards of living (Musgrave, et al 2009).
Discussion of the equilibrium price and quantity, and the effects of demand and supply shifts upon the equilibriums
Equilibrium price and quantity
The demand and supply utilities pose equity in market when the quantity supplied equals the foregoing amount of demand. Similarly, the equilibrium results when the amount supplied meets all the demand satisfactorily without any remaining surplus. The situation is called a prefect market whereby the demand and supply curves conform at a certain point whereby the imposed unit price for the commodity is favourable to buyers and sellers such that all unit sales excel meeting the demand satisfactorily (Boyes, & Melvin, 2013).
Effects of demand and supply shifts upon the equilibriums
Demand and supply shifts affect equilibriums when one of the utility shifts while the other one stagnates. For instance, a increase in the supply for products while the demand remains constant shall cause a reduction of the prices while in the event of increased supply, the price will increase accordingly (Cohn, 2007). Consequently, an increase in the demand for commodities while the supply remains constant leads to increased prices and thereby the shifts move unevenly and cause disequilibrium, which implies varied instead of equated prices to the quantities.
Price elasticity of demand and supply
Price elasticity of demand and supply suggests the natural course that the unit prices of commodities will either increase or decrease whenever the demand or supply increases or reduces respectively. Price elasticity of demand prevails when the rise of demand for products leads to increased prices since the supply remains constant (Musgrave, et al 2009). This situation prevails for necessary goods such that increase in demand will lead to increase in prices, but with the absence of reduction in the marginal consumption or increased supply, buyers will continue to purchase the commodity at the increased price. On the other hand, price elasticity of supply occurs whenever product prices increase or reduce in the event of reduced or increased quantity in the market while the demand remains constant. However, there are periods when demand and supply shifts are inelastic towards price increments and price reductions (Cohn, 2007). For example, the increase in the price of luxury and goods of ostentation will lead to increased demand and reduced supply thus causing price inelasticity such that the curves can never conform to the law of equilibrium.
Describe
Substitutes and compliments
Substitute commodities connote to those products whose utility supplements the use of other commodities. For example, a person may substitute the need for tea as a beverage with coffee. Substitutes hence serve as replacements to other products after buyers prefer them as ideal in serving the craving needs. On the contrary, complements are not necessarily goods demanded by the buyers to serve a particular need, but their demand and purchase depends on the buyers’ perceptions that the product shall enhance the value of a product’s utility. For example, design and décor undertaken to enhance the serene of a home amounts to the use of complements.
Luxury and necessity goods
Luxuries are the goods that consumers demand and purchase for the purposes of perceiving increased social status. Examples of these goods include expensive automobiles, jewelry, and houses among others. Arguably, the dem...