Difference between revisions of "Introduction to entrepreneurship/IENT103/Economics/Supply"

Revision as of 23:17, 3 January 2019

To understand the model, we should first look at Supply, and then look at Demand; before putting the two concepts together.

In simple terms:

• Supply is the amount of something that providers are willing to bring to the market (i.e. supply) at a given price.
• Demand is the amount of something that consumers want to buy (or demand) at a given price. ^[1]

So what is Supply and Demand? It is an economic model where the price at which a good is sold is controlled by the good’s supply, and its demand.

In January 2017 there was a shortage of courgettes due to bad weather across Europe ^[2]. This resulted either in there being no supply available to supermarkets or where there was some the price went from £6-7/box to £20/box.

Required reading

There are multiple factors that affect Supply and Demand. To explore the model further read the following texts and then attempt the quiz below.

1. Impacts of Supply and Demand on Businesses by Boundless.
2. Supply and Demand on Wikipedia.

Quiz

Answer the following questions.

• If supply decreases, prices will
  • decrease
    • Incorrect. Think about the courgette example above.
  • stay the same
    • Incorrect. Think about the courgette example above.
  • increase
    • Correct.
• Price decreases result in
  • consumers buying less of the good.
    • Incorrect. Think about why shops have sales.
  • consumers buying more of the good.
    • Correct.
  • no change in consumer buying.
    • Incorrect. Think about why shops have sales.
• Equilibrium price is where the quantity of a good demanded by buyers equals the quantity producers are willing to supply.
  • True
    • 'Correct.
  • False
    • Incorrect.

References

1. ↑ What Is ‘Supply and Demand’ in Business?
2. ↑ The Guardian