Supply and Demand and Price Elasticity Paper. The changes in supply and demand will be looked at along with how changes in price and quantity influence market equilibrium.

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Supply, Demand and Price Elasticity � PAGE �1�

Supply and Demand and Price Elasticity Paper

Andrea Walicke, Richard Lawson, Tonya Ferguson

ECO/212 - Principles of Economics

John Bayer

2-8-2010

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Supply and Demand and Price Elasticity Paper

Pricing, supply, and demand are the foundation of the economic structure. This paper is intended to highlight the affects of each. The changes in supply and demand will be looked at along with how changes in price and quantity influence market equilibrium. It will also look at how the necessity of a good and the availability of substitutions affect price elasticity. Finally, it will compare and contrast market structures and the role that economics plays within these systems.

Supply and Demand

Supply and demand are the root concepts of economic analysis since economics is basically concerned with a result and how the result is achieved. The quantities of goods or services demanded satisfy the requirement for the ends.

These concepts are relative and are interchangeable. Supply and demand are opposing concepts, in that demand is an inverse or falling function of the price whereas supply is a direct or rising function. Although both supply and demand are important functions, it is necessary to establish equilibrium between them. This would mean reaching a place where there is an equal point or agreement between the consumer and the producers. This can only be attained when the quantities demanded and the quantities supplied are at an equal point, when there is no competition between buy and sell.

There are many factors that influence changes in supply and demand. The most prevalent would be pricing. When a product is priced to high, the demand for such product will eventually decrease. Conversely, under pricing could cause the demand to sky rocket and create a problem with maintaining supplies.