Seminar paper in English, topic - Demand, Esej od Poslovni engleski jezik

Preuzmite Seminar paper in English, topic - Demand i više Esej u PDF od Poslovni engleski jezik samo na Docsity! Higer Medical and Business-Technological School of Applied Studies Seminar paper Subject: English language 2 Topic: Demand 1 March, 2018 Table of contents 1. Introduction………………………………………………………………….3 2. Law of demand………………………………………………………………4 3. Determinants of demand…………………………………………………….5 4. Demand curve ………………………………………………………………7 5. Shift in demand curve……………………………………………………….8 6. Conclusion………………………………………………………………….10 7. Literature…………………………………………………………………...11 2 If the quantity doesn't change much when the price does, that's called inelastic demand. An example of this is gasoline. You need to buy enough to get to work regardless of the price. This relationship holds true as long as "all other things remain equal." That part is so important that economists use a Latin term to describe it -- ceteris paribus. The "all other things" that need to be equal under ceteris paribus are the other determinants of demand. These are prices of related goods or services, income, tastes or preferences, and expectations. For aggregate demand, the number of buyers in the market is also a determinant. If the other determinants change, then consumers will buy more or less of the product even though the price remains the same. That's called a shift in the demand curve.[2] 3. Determinants of demand Demand drives economic growth. Businesses want to increase demand so they can improve profits. Governments and central banks boost demand to end recessions. They slow it during the expansion phase of the business cycle, to combat inflation. If you offer any paid services, even you try to raise demand for them. What drives demand? In economics, there are five determinants of individual demand, and a sixth for aggregate demand. The Five Determinants of Demand The five determinants of demand are: 5 1.The price of the good or service. 2.Prices of related goods or services. These are either complementary (purchased along with) or substitutes (purchased instead of). 3.Income of buyers. 4.Tastes or preferences of consumers. 5.Expectations. These are usually about whether the price will go up. For aggregate demand, the number of buyers in the market is the sixth determinant. How Each Determinant Affects Demand You can understand how each determinant affects demand if you first assume that all the other determinants don't change. Price. The law of demand states that when prices rise, the quantity of demand falls. That also means that when prices drop, demand will grow. People base their purchasing decisions on price if all other things are equal. The exact quantity bought for each price level is described in the demand schedule. It's then plotted on a graph to show the demand curve. If the quantity demanded responds a lot to price, then it's known as elastic demand. If the volume doesn't change much, regardless of price, that's inelastic demand. 6 The demand curve only shows the relationship between the price and quantity. If one of the other determinants changes, the entire demand curve shifts. Income. When income rises, so will the quantity demanded. When income falls, so will demand. But if your income doubles, you won't always buy twice as much of a particular good or service. There's only so many pints of ice cream you'd want to eat, no matter how wealthy you are. That's where the concept of marginal utility comes into the picture. The first pint of ice cream tastes delicious. You might have another. But after that, the marginal utility starts to decrease to the point where you don't want any more. Prices of related goods or services. The price of complementary goods or services raises the cost of using the product you demand, so you'll want less. For example, when gas prices rose to $4 a gallon in 2008, the demand for Hummers fell. Gas is a complementary good to Hummers. The cost of driving a Hummer rose along with gas prices. The opposite reaction occurs when the price of a substitute rises. When that happens, people will want more of the good or service and less of its substitute. That's why Apple continually innovates with its iPhones and iPods. As soon as a substitute, such as a new Android phone, appears at a lower price, Apple comes out with a better product. Then the Android is no longer a substitute. Tastes. When the public’s desires, emotions or preferences change in favor of a product, so does the quantity demanded. Likewise, when tastes go against it, that depresses the amount demanded. Brand advertising tries to increase the desire for consumer goods. For example, Buick spent millions to make you think its cars are not only for older people. 7 The price of related goods. These can be substitutes, such as beef versus chicken. They can also be complementary, such as beef and Worcestershire sauce. There is a fifth determinant that applies to aggregate demand only. That is the number of potential buyers. The demand curve plots the relationship between the quantity demanded of a good or service and its price. The curve depicts in a graphical way the demand schedule, which details exactly how many units will be bought at each price. The law of demand guides that amount. That says less is bought at a higher price ceteris paribus. That means all determinants of demand other than price must stay the same. Factors That Cause a Demand Curve to Shift A demand curve shifts when a determinant other than prices changes. If the price changes, then the demand curve will tell you how many units will be sold. But if the price remains the same, and the income changes, then that changes the amount purchased at every price point. People can buy more of what they want when they have more income. Of course, the seller will probably raise the price at some point, causing inflation. But at least in the short-term, the price will remain the same and the quantity sold will increase. The same effect occurs if consumer trends or tastes change. If people buy electric vehicles, but the price of gas stays the same, then less gas will be sold. 10 The curve shifts to the left if the determinant causes demand to drop. That means less of the good or service is demanded at every price. For example, when the economy is booming, buyers' incomes will rise. That means they'll buy more of everything, even though the price hasn't changed. The curve shifts to the right if the determinant causes demand to increase. That means that more of the good or service are demanded at every price. Using that same illustration, when the economy is in a recession, buyers' income drops. They will buy less of everything, even though the price is the same.[5] 6. Conclusion We've discussed fundamental concept in economics - demand. Hopefully the forces that cause changes in demand aren't mysterious anymore. Let's recap. The law of demand describes the behavior of buyers. In general, people will demand - that is buy - more of a good or service at lower prices than at higher prices. When this relationship is graphed, the result is a demand curve. A change in price results in movement along the demand curve from one point to another and is called a change in the quantity demanded. When other factors in the 11 market change, the demand curve shifts to the left or the right. This is a change in demand. Supply and demand together determine market equilibrium. On a graph, market equilibrium is the point where the supply and demand curves intersect. The price at this intersection is the equilibrium price and the quantity is the equilibrium quantity. When the market for good or service is in equilibrium, there are no surpluses and no shortages. As buyers and sellers interact, the market will trend toward equilibrium quantity and equilibrium price. It's as if an invisible hand pushes and pulls markets toward equilibrium levels.[6] 7. Literature 1. https://www.thoughtco.com/intro-to-demand-in-economics-1146959 12