Affects of Supply and Demand on Business Term Paper

Affects of Supply and Demand on Business - Term Paper Example d making the management to take the necessary course of action.Analysis of the market forces helps departmental decision making in that each and every section of the business optimizes resource allocation to minimize costs and maximize productivity in a bid to meet the demand in the market.Table of Contents Introduction Basic Laws and Principles of Demand and Supply Demand Side Supply Side Equilibrium Discussion Conclusion Works Cited Introduction Demand can be viewed as the quantity of goods and services that the market, consumers,is willing to purchase and consume within a given period of time and at a certain price. Demand varies from time to time due to rationality of the consumers; changes of preference and tastes,changes of their economic levels and statuses,and other market conditions such as changes of cost of production that influence price fluctuations.Supply on the other hand refers to the resource and or the quantity availed to the market by the producers within a given p eriod of time dictated by the prevailing market conditions. ... d services; a factor of manufacturing costs, competition, market conditions and the quality of the product, and the buyers determine the quantity of the product/ service they are willing to purchase and consume at the price level presented by the suppliers/ producers (Brennan and Rowan 6-9; Nasrin 1-20). In monopolistic markets forces of demand and supply may not influence the price of the product/ service and vice versa thus in this paper we shall evaluate and analyze the effects of supply and demand on a business in a competitive market (Reuvid 2-6). Basic Laws and Principles of Demand and Supply To understand how demand and supply impacts on a business, we need to evaluate their market mechanisms in relation to price so as to understand how they influence actions of the business at given times within the production cycles, which can be analyzed by understanding the their interaction aspects. Whenever the demand increases but the supply remains the same or unchanged, there is short age of goods and services in the market leading to a higher equilibrium price. Whenever demand decreases and the supply remain unchanged, there is surplus supply of goods and services which lead to lower equilibrium price. Whenever supply increases and demand remain unchanged, there is a surplus leading to a lower equilibrium price Whenever supply decreases and the demand is unchanged, there is a shortage of supply leading to a higher in equilibrium price Demand Side To understand how the demand of goods impact on a business venture we shall evaluate the demand schedule and relate it to the immediate decisions that the management make and the course of adjustments. As discussed earlier the demand of a given commodity will vary with time depending on factors such as price; changes of income,