Week 2: Competitive Market - Supply and Demand Variables
One variable that affects the supply curve is the price of goods. For example, if the cost of raw materials like steel goes up, it raises costs of production, which in turn causes suppliers to produce less at the same price. This has a knock-on affect of moving the supply curve to the left, in terms of reducing the overall supply.
A variable that affects the demand curve is consumer income. For example, if the incomes of people goes up they have more purchasing power, which can cause demand for goods like electronics or food to go up. This puts pressure on the demand curve to shift to the right, which then results in a higher equilibrium price and quantity.
An example of a product with changing demand and supply is gasoline, which most people use almost daily to get to and from work or
If geopolitical issues like war or embargoes cause oil production cuts, the supply of gasoline decreases due to higher production costs. This moves the supply curve to the left. The price of gas rises. On the demand side, a public shift towards electric vehicles (EVs) can have the opposite effect: the reduction in demand would move the demand curve to the...
…think about stopping consumption altogether. This idea could be used to explain why we pay less for bulk purchases; the expectation of extra utility from additional units is lower?.
An example of perceived unfair price discrimination is the fluctuating pricing model used by ride-hailing services like Uber and Lyft. Prices surge during peak hours or bad weather. This pricing model reflects supply and demand surges, but it can also be seen by the public as exploitative. Initially, I myself believed this model to be unfair, but now I see that it actually incentivizes more drivers to be available during high-demand periods. In other words, it encourages a balance of supply…
