Business Economics Demand and Supply Management

Question: Describe about the Business Economics for Demand and Supply. Answer: Introduction Demand and supply are two important concepts that are widely used in the field of economics. There is a strong relationship between the demand and supply. These both concepts play a major role to decide the price and quantity of a particular product or commodity. The interaction of supply and demand is essential to determine the price of a product in the marketplace. Along with this, this research essay is useful to describe the major factors that may influence the demand and supply of a commodity in a market. In the context of this research essay, I would like to select coffee as a product to portray the major factors that may affect demand and supply of the selected product. Demand and Supply In economics, demand and supply of a commodity may influence by several factors. The major factors that can affect demand as well as supply of coffee in the Australia market are described as below: Price of a Commodity: It is true that price is a key factor that affects demand and supply of a commodity. Price is a major factor that has an effect on the demand and supply side of a product. According to the law of demand, if the price of a product increases then the supply of that product decreases and vice versa (Griffith, OConnell and Smith, 2015). For example, if the price of coffee will decline then there can see an increase in the demand and supply of coffee in the Australian market. The main reason behind it is that the decreased prices of a commodity induce customers to buy more quantity promptly. Income Level of Consumers: The income level of consumers is the other key factor that affects demand and supply of a commodity. An increased income level plays a major role in order to increase the demand of a product. The main reason behind it is that, with the help of an increased income level, people become more able to purchase a commodity in the preferred quantity (Mina, Lahr and Hughes, 2013). Along with this, an increased income level also increase the supply of a product in the market. It is because of when the demand of the product will increase then the supply of that product will also increase automatically. For example, an increased income level of people will increase the demand of coffee in the Australian market. It is because of people will prefer coffee instead of other substitute products that are low-priced in comparison to coffee. Apart from this, a decreased income level will also influence the demand supply of a product. For example, a decrease in the income lev el of consumers will reduce the demand and supply of coffee in the marketplace. It is because of, in this situation, the product would not be affordable for the lowered income people of the nation (Pevcin, 2012). Price of Substitute Goods: This is also other major factor that has an effect on the demand and supply of a commodity. If the substitute goods are available at the lowered price then people will choose the substitute products in preference to their preferred product. For example, Tea, Caro, Qishr, Postum, etc. are the major substitutes of coffee. If the price of coffee is high in the country then people will show their interest in the purchase of its substitute goods. This will reduce the demand supply of coffee in the market; and also enhance the demand supply of its substitutes within the nation (McLean and Applegate, 2012). Tastes Preferences of Consumers: The tastes and preferences of consumers also influence the demand and supply of a commodity in a direct way. If customers do not see any change in the taste of coffee and feel bored with the same taste then they can move towards the other substitute product of coffee. Moreover, weather also affects the demand and supply of coffee. For example, people prefer hot drinks in winter and cold drinks in summer (Yohannes and Matsuda, 2016). As a result, the demand and supply of coffee may increase in the winter season frequently. Competition: Competition is an important factor that directly influences the demand of a product/commodity. For example, byron bay is a coffee company in the Australia. There are lot of competitors exist in the market. If they reduce their prices then the customers of byron bay will purchase their products. Moreover, if a competitor introduces a new flavor of coffee then people will preference the new taste in place of other old tastes (Kolk, 2013). As a result competition is considered a major factor that affects the demand and supply of a product without any doubt. Prospect of Price Change of a Commodity: The forecast of price change in future also influences the demand and supply of a product in the current period. For example, if prices of coffee will increase in future then people would like to store a huge quantity of coffee. This will increase the demand of coffee. If there is high demand of coffee then the producer will produce more and more coffee to fulfill the demand of the customers (Cleaver, 2014). In this way, it will affect both demand and supply of coffee in the market. Conclusion On the basis of above analysis, it can be assumed that, both supply and demand factors depend on each other. Moreover, there are numerous factors other than price that may influence demand and supply of a product in a market. References Cleaver, T. (2014). Economics: The Basics. USA: Routledge. Griffith, R., OConnell, M. and Smith, K. (2015). Relative prices, consumer preferences, and the demand for food. Oxford Review of Economic Policy, 31(1), pp. 116-130. Kolk, A. (2013). Mainstreaming sustainable coffee. Sustainable Development, 21(5), pp. 324-337. McLean, W. and Applegate, M. (2012). Economics and Contemporary Issues, 9th ed. USA: Cengage Learning. Mina, A., Lahr, H. and Hughes, A. (2013). The demand and supply of external finance for innovative firms. Industrial and Corporate Change, 22(4), pp. 869-901. Pevcin, P. (2012). Demand and Supply Side View On The Factors Affecting Size Of The Non Profit Economy. Ekonomska istraÃ… ¾ivanja, (1), pp.140-162. Yohannes, M. F. and Matsuda, T. (2016). Weather Effects on Household Demand for Coffee and Tea in Japan. Agribusiness, 32(1), pp. 33-44.