Difference between revisions of "Introduction to entrepreneurship/IENT103/Economics/Supply"
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| − | However, Supply and Demand can (and often does) fluctuate. When the supply of a good is greater than the demand for that good, there is a '''surplus'''. On the other hand, when demand for a good is greater than the supply, then there is a '''shortage'''. In January 2017, for instance, there was a shortage of courgettes in the UK due to bad weather across Europe <ref>[https://www.theguardian.com/lifeandstyle/2017/jan/17/uk-supermarket-courgette-shortage-italy-spain-cold The Guardian]</ref>. This resulted in either no supply available to many supermarkets or, where supply was possible, the price rose from £6 or £7 per box to £20 per box. In another example | + | However, Supply and Demand can (and often does) fluctuate. When the supply of a good is greater than the demand for that good, there is a '''surplus'''. On the other hand, when demand for a good is greater than the supply, then there is a '''shortage'''. In January 2017, for instance, there was a shortage of courgettes in the UK due to bad weather across Europe <ref>[https://www.theguardian.com/lifeandstyle/2017/jan/17/uk-supermarket-courgette-shortage-italy-spain-cold The Guardian]</ref>. This resulted in either no supply available to many supermarkets or, where supply was possible, the price rose from £6 or £7 per box to £20 per box. In another example, at the end of 2018, house prices in New Zealand were forecast to jump to record highs because of a housing shortage (with demand greater than supply)<ref>[https://www.oneroof.co.nz/news/35800 OneRoof]</ref>. By contrast, fishermen (and women) in Northern Australia experienced a sharp drop in the price of barramundi fish in 2018, due to a surplus caused by farmed and imported fish entering the market to compete with their local wild-caught fish. This may have been wonderful for customers, but think about the impact on the sellers!<ref>[https://www.abc.net.au/news/2018-10-18/barramundi-oversupply-sparks-price-drop/10388500 ABC News]</ref> |
Can you think of any examples of shortages or surpluses in your region? | Can you think of any examples of shortages or surpluses in your region? | ||
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*** '''Think about the meaning of the word 'equilibrium' in other contexts. Does that help?''' | *** '''Think about the meaning of the word 'equilibrium' in other contexts. Does that help?''' | ||
* If there is a surplus of a good, a supplier is likely to: | * If there is a surplus of a good, a supplier is likely to: | ||
| − | ** | + | ** increase prices. |
*** '''Incorrect'''. Higher prices would make it hard for this supplier to compete with others. | *** '''Incorrect'''. Higher prices would make it hard for this supplier to compete with others. | ||
| − | ** | + | ** keep prices the same. |
*** '''Incorrect'''. Keeping prices at the same level may make it hard for this supplier to compete with others, if they are reducing their prices. | *** '''Incorrect'''. Keeping prices at the same level may make it hard for this supplier to compete with others, if they are reducing their prices. | ||
| − | ** | + | ** reduce prices. |
*** '''Correct.''' Reducing prices may help to increase sales. | *** '''Correct.''' Reducing prices may help to increase sales. | ||
}} | }} | ||
Latest revision as of 21:48, 17 January 2019
To understand the model, we should first think about 'Supply', and then consider '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? This is an economic model where the price at which a good (a product or service) is sold is controlled by the good’s level of supply, and its demand. If the supply of a good is equal to its demand, there is an economic equilibrium, and the good is sold at a stable price which buyers and sellers are happy with.
However, Supply and Demand can (and often does) fluctuate. When the supply of a good is greater than the demand for that good, there is a surplus. On the other hand, when demand for a good is greater than the supply, then there is a shortage. In January 2017, for instance, there was a shortage of courgettes in the UK due to bad weather across Europe [2]. This resulted in either no supply available to many supermarkets or, where supply was possible, the price rose from £6 or £7 per box to £20 per box. In another example, at the end of 2018, house prices in New Zealand were forecast to jump to record highs because of a housing shortage (with demand greater than supply)[3]. By contrast, fishermen (and women) in Northern Australia experienced a sharp drop in the price of barramundi fish in 2018, due to a surplus caused by farmed and imported fish entering the market to compete with their local wild-caught fish. This may have been wonderful for customers, but think about the impact on the sellers![4]
Can you think of any examples of shortages or surpluses in your region?
References
