What are some things that would affect changes in supply?
How to change the quantity demand
Effects of raised minimum wage
Introduction For people to succeed in their businesses, careers or professional lives, action is an imperative ingredient. However, it matters where people base their action. For instance, if individuals base their action on self-interest, they will automatically act in response to inducements.
In other words, they will start monitoring costs and benefits closely. The two, costs and benefits, can affect the activities that people do. Take for example when the costs of doing something increases or better still, when the benefits decline. Automatically, people will perform much less of that activity.
Economists have come up with a model – the model of supply and demand – that explains how action on costs and benefits can affect our markets (Schenk, 2008, p.1).
My firm specializes in the business of milk production and dairy farming. Of lately, dairy farmers in United States, Australia and New Zealand have received high prices from the sale of milk, thanks to the ever-changing climate and trade policies.
Additionally, the stiff competition for animal feeds has caused the doubling of the prices as farmers also incur additional expenses. Thus, the increase of income, limited supply of milk, external economic changes and social economic changes are some of the factors that change the demand of milk (Birkinshaw, 2007, p.1).
What are some things that would affect changes in supply? A number of factors affect the changes in supply of products or services. For example, the rate of production is paramount to the supply of products such as milk. Less production of commodities strains the supply chain, while abundant production means, goods will be available in the market in plenty.
Demand is also another factor that affects the supply of commodities. In case of high demands, manufacturers have to produce more. On the same note, cost is also another factor that affects changes in supply is cost. Whenever the cost of commodities reduces, the demand becomes high thus, calling for more supply.
Get your 100% original paper on any topic done in as little as 3 hours Learn More A good transport network can enhance the supply of commodities, as goods will reach the market in time. Additionally, government regulations and trade policies can also affect the supply of commodities. For instance, government can enact legislation aimed at restricting certain commodities from reaching the market.
Finally yet importantly, unscrupulous business practices can affect changes in supply, where a few dishonest individuals plot bureaucratic means of controlling the supply chain of any product or service (Buchot, 2011, p.1).
How to change the quantity demand One factor that can change the quantity demanded is price. In fact, it is the demand price that is enables the movement of commodities along the demand curve. The phrase “a change in quantity demanded” simply implies the amount of commodities that the consumers are keen and able to buy.
Once the demanded price changes, it will definitely affect the amount of commodities that people will buy. For instance, if the demanded price increases, people will buy less goods and vice versa.
Undoubtedly, the change in demand price will also affect the movement along the demand curve although the five determinants stay unaffected. Mathematically, the quantity demanded of a particular commodity is a strapping function of the demanded price (Regan, 2007, p.1).
Effects of raised minimum wage Whenever the government increases the minimum wage by even a slight percentage, it affects businesses negatively. For example, in my dairy farm, I will definitely cut jobs in order to sustain my business.
Additionally, there will be no more hiring of people to work in my firm, as I do not wish to incur more expenses than revenue. Additionally, the price of milk per is likely to increase due to increased expenses. This means that consumers will have to buy milk at an increased price – something that will affect the quantity demanded (Bernstein, 2004, p.1).
We will write a custom Essay on Supply and Demand specifically for you! Get your first paper with 15% OFF Learn More Reference List Bernstein, J. (2004). Minimum Wage and Its Effects on Small Business. Web.
Birkinshaw, V. (2007). A Thirst for Milk Bred by New Wealth Sends Prices Soaring. New York Times. Web.
Buchot, E. (2011). USA market: Changes in supply. Web.
Regan, E. (2007). Milk demand stays strong despite high prices. Web.
Schenk, R. (2008). The Model of Supply and Demand. Web.
Supply and demand; Market for Milk Essay
Nursing Assignment Help Introduction Demand can be defined as the amount of goods or services that the buyers are willing and able to buy in a specific duration of time (Rittenberg, 2008, p. 58). The quantity demanded can be determined by various factors. In most cases, consumer’s choice to consume a particular product is determined by their preferences and tastes for particular products as well as the prices. On the other hand, the quantity supplied is the amount of goods or services that buyers are willing and able to supply in the market in a specific time. In this study, we are considering the market for milk.
Impact on price and quantity of milk of an advertising campaign which highlights scientific studies that finds that drinking milk can help reduce weight gain
The main aim for an organization to conduct an advertisement is to increase the level of sales. An advert plays a role of enticing consumers to buy a certain good or service. Advertisement also has a purpose of creating top of mind awareness. This offers a form of branding which attracts customers.
An advert informing potential buyers on its significance in weight loss will entice new customers who may not have been consuming milk to switch into milk consumption. This will lead to an increase in the quantity of milk demanded.
An advert informing customers on scientific discovery indicating the importance of milk in weight loss may also encourage the existing buyers to increase their levels of consumption. This will also lead to an increase in the level of milk sales.
As already seen, an advertisement increases the level of the quantity demanded. With time, the level of demand may exceed the quantity supplied. This will lead to an increase in prices. This is based on the assumption that all other factors are held constant. There are other factors which affects the quantity demanded for milk. For instance, an increase in the level of households’ income increases the quantity of milk demanded. For instance, an increase in the level of the household’s income in China and the surrounding regions has significantly led to an increase in milk prices (Arnold, not dated, par 4). Prices increases as a result of high demand for milk which is as a result of high household incomes.
Impact on price and quantity of milk of a mad cow disease epidemic
A mad cow disease has various effects on the milk market. It can lead to a decrease in the level of quantity supplied in the market. The affected animals reduce the level of production. If the disease persists, the level of quantity demanded will exceed the level of quantity supplied. This will lead to rising in milk prices. This is under the assumption that other factors are held constant.
Impacts of milk price decrease
According to the law of demand, the prices and the quantity of product demanded are moves in opposite direction. That is, when the prices increase, the quantity demanded decreases. This conclusion is based on the assumption that other factors which affect milk market are held constant. Therefore, a decrease in the prices of milk leads to an increase in the quantity of milk demanded.
Get your 100% original paper on any topic done in as little as 3 hours Learn More Impact on price and quantity of milk by the government decides to implement a price ceiling.
A price ceiling is a form of government intervention to protect consumers. Through a price ceiling, a government sets price limits over which the prices of a particular commodity should not exceed. In order for a price ceiling to have any effect to the consumers, it must be set below the market equilibrium. Otherwise it will be ineffective.
A price ceiling on the prices of milk will lead to a lower milk price below the market equilibrium price. This will lead to an increase in the quantity of milk demanded.
Impact of an increase in the prices of a compliment good; cookies
Compliment goods are goods which are used in conjunction with each other. Therefore, we expect an increase in level of demand in one of these to induce an increase in the level of demand for the other good.
For instance, it is assumed that cookies are used in conjunction with milk. Therefore, a change in demand in one of these will lead to changes in the quantity of milk demanded. Therefore, an increase in prices of cookies leads to an increase in the quantity of milk demanded.
Price controls Price control is the attempt by the government to control the prices of goods and services in the market. This is usually aimed at maintaining availability of basic needs to the customers.
Advantage Of To Price Controls
One of the main advantages is that it maintains the affordability of basic goods and services. For instance, a price ceiling lowers the prices of milk below the market levels. At lower prices, more people can afford milk and this will maintain a healthy nation.
Disadvantage of price controls
There are several drawbacks associated with price controls. Price control leads to shortages. When the government puts demands the producer to provide prices below the market prices, the amount of the product demanded will exceed the quantity supplied in the market. The level of demand increases to the point where supply cannot be kept up. These shortages can lead to black markets as people try to find a solution for shortages (Anonymous, 2008, par 2).
We will write a custom Essay on Supply and demand; Market for Milk specifically for you! Get your first paper with 15% OFF Learn More Price Elasticity of Demand Elasticity of demand can be defined as the percentage change in the level of quantity demanded of a particular good or service divided by the percentage change in the prices of that particular good or services all other things held constant (Rittenberg, 2008, p. 115).
In the case of inelastic goods, consumers are less responsive to changes in prices. In this case, the elasticity of demand is less than one. That is, e<1.
In the milk market, consumers are less responsive to changes in prices. This is because milk is a basic good. Also, there are no close substitutes for milk. Therefore, the demand for milk is inelastic. Consequently, people may continue to consume milk despite of increase in prices. However, there may be slight changes in quantity demanded.
There are several determinants of elasticity of demand. These include the availability of substitutes, time or availability of households’ budget. In the case of milk, there are no close substitutes; therefore the demand is likely to be inelastic.
Impact of Milk Prices Increase on the Total Revenue Total revenue is the amount of money received from the sale of goods and services. That is, TR=QP. In the case of elastic demand, any change in price has a significant impact on the quantity demanded. Since the demand for milk is inelastic, changes in price will lead to a small change in the level of revenue. Therefore, the total revenue will change with a small percentage.
Reference List Anonymous (2008). Price Controls – Advantages and Disadvantages. Web.
Arnold, A. (n.d.). Thirst for Milk Bred by New Wealth Sends Prices Soaring. Web.
Rittenberg, L. (2008). Principles of Microeconomics. New York: Flat World Knowledge.
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