Profit and Demand

Demand and profit
Gale, D., 1955. The regulation of supply and demand. Mathematica Scandinavia, pp.155-169.
In this particular article, Gale tries to elaborate on the concept of monetary equilibrium. The elaboration bases this on balance of supply and demand. According to the author, grant and demand have always played a sizable role in the theoretical economics and he begins by using describing supply and demand before digging deeper into the idea of economic equilibrium.
Supply a number of goods, as nicely as, services available in the market at a given length of time. There is a clear distinction between supply and demand, in that, demand is the amount of people in the market that are willing to buy the goods and pay for the services available in the market. If the demand for a commodity goes higher than the supply, it creates a shortage which means that more items are demanded at a higher price and fewer items are being provided at the same price they were before or even lower than that. If the supply increases the prices decrease and the opposite holds true. This particular phenomenon is referred to as the ‘indirect relationship between supply and demand’. There are various factors which affect supply and they include the following;

The cost of production: Once the cost of production increases, less will be produced thus, the supply of what is produced will be low.

The availability of the resources: The fewer the available resources the lower the supply of the commodities those resources are used to produce.

The price of other commodities or services and these are 2 types;

Competitive supply: In the case, a producer switches from supplying commodity c to supplying commodity E, then the supply of commodity C definitely goes down because it is far much less profitable for the producer.

Joint supply: It is true to state that a rise in the price of one commodity may cause a rise in another commodities price, for example, if the price of wood rises then the price of wooden furniture rises.

Härdle, W., Hildenbrand, W. and Jerison, M., 1991. Empirical evidence on the law of demand. Econometrica: Journal of the Econometric Society, pp.1525-1549.

The authors of this particular journal seek to empirically test the law of demand. They pay attention to the mean income effect matrix in a bid to understand how it works as a sufficient condition for market demand. In order to empirically test the law of demand, acknowledged that the law of demand states the following.

There is a negative relationship between the price of goods and services and the quantity that is purchased. When an action becomes too costly, fewer people choose to do it. An increase in the price of a commodity will make it less affordable for people to purchase it, thus, the demand will be low. When the price, on the other hand, is lowered the demand for the commodity will increase as illustrated in Exhibit 1 below:

Just, R.E. and Zilberman, D., 1986. Does the law of supply hold under uncertainty?. The economic journal, 96(382), pp.514-524.

The authors of this economic journal seek to identify whether the law of supply holds under uncertainties. In their research, they point out that it may fail when particular generalities are introduced simultaneously.

Just and Zilberman agrees that the law of supply states that there is a positive relationship between the price of goods or services and the quantity that is being supplied. Using exhibit 3 which is supply curve, it can be established that the producers will supply a lot of goods if the prices rise.

Kuhn, H.W., 1956. A note on” The law of supply and demand”. Mathematica Scandinavica, pp.143-146.

The author of this article builds upon the work of Gale in his article ‘The law of supply and demand. Mathematica scandinavica’, by acknowledging that Gale has managed to show the existence of an equilibrium through a simple model of a competitive market. Kuhn the author builds upon Gales work by making recommendations to some of the features of the model presented by Gale. In doing so Kuhn generates a good introduction that defines demand and supply and acts a good foundation for his recommendations.

A demand can be defined in simple terms as a desire with financial power backing. Just like supply, demand has a close relationship with price. If the supply of a commodity remains the same, the more the people want that commodity the price of a commodity will be. The number one factor that affects demand is the consumer behavior. The ways in which consumers behave can affect demand in very many ways as the consumers usually gain satisfaction through the consumption of goods and services and this satisfaction is referred to as utility.

Marshall, A., 1920. Principles of economics: an introductory volume. Royal Economic Society (Great Britain).

The principles of economics is a book that looks at a lot issues related to economics and some of those issues are demand, supply, and how the forces of the 2 result in the determination of prices.

According to Marshall, it is the forces of supply and demand that combine to determine the prices of commodities and services in a market. According to exhibit 5 below, the point where the demand curve and the supply curve intersect determines the market price of a commodity or service.

References

Gale, D., 1955. The law of supply and demand. Mathematica scandinavica, pp.155-169.

Härdle, W., Hildenbrand, W. and Jerison, M., 1991. Empirical evidence on the law of demand. Econometrica: Journal of the Econometric Society, pp.1525-1549

Just, R.E. and Zilberman, D., 1986. Does the law of supply hold under uncertainty?. The economic journal, 96(382), pp.514-524.

Kuhn, H.W., 1956. A note on” The law of supply and demand”. Mathematica Scandinavica, pp.143-146.

Marshall, A., 1920. Principles of economics: an introductory volume. Royal Economic Society (Great Britain).