This is discussed below. It is not a theory of output, or of money income, or of the price level. Thus money is an asset or capital good.
Determination of price policy: While fixing the price of this product, a businessman has to consider the elasticity of demand for the product. He should consider whether a lowering of price will stimulate demand for his product, and if so to what extent and whether his profits will also increase a result thereof.
If the increase in his sales is more than proportionate, to the reduction in price his total revenue will increase and his profits might be larger. On the other hand, if increase in demand is less than proportionate to fall in price, his total revenue we will fall and his profits would be certainly less.
Therefore, knowledge of elasticity of demand may help the businessman to make a decision whether to cut or increase the price of his product or to shift the burden of any additional cost of production on to the consumers by charging high price.
In general, for items having inelastic demand, the producer will fix a higher price and items whose demand is elastic the businessman will fix a lower price. Price discrimination refers to the act of selling the technically same products at different prices to different section of consumers or in different in sub-markets.
The policy of price-discrimination is profitable to the monopolist when elasticity of demand for his product is different in different sub-markets.
Those consumers whose demand is inelastic can be charged a higher price than those with more elastic demand.
Shifting of tax burden: To what extent a producer can shift the burden of indirect tax to the buyers by increasing price of his product depends upon the degree of elasticity of demand.
If the demand is inelastic the larger part of the indirect tax can be shifted upon buyers by increasing price. On the other hand if the demand is elastic than the burden of tax will be more on the producer.
Taxation and subsidy policy: The government can impose higher taxes and collect more revenue if the demand for the commodity on which a tax is to be levied is inelastic. On the other hand, in ease of a commodity with elastic demand high tax rates may fail to bring in the required revenue for the government.
Importance in international trade: The concept of elasticity of demand is of crucial importance in many aspects of international trade.
The success of the policy of devaluation to correct the adverse balance of payment depends upon the elasticity of demand for exports and imports of the country. The policy of devaluation would be benificial when demand for exports and imports is price-elastic.
A country will benefit from international trade when: The terms of trade between the two countries also depends upon the elasticity of demand of exports and imports of two countries. If the demand is inelastic, the terms of trade will be in favour of the seller country.
Determinants of demand The demand for a commodity can be considered from two points of view 1. Individual demand 2. Market demand Individual Demand Individual demand for a commodity is the amount an individual is willing and able to buy at any given price over a given period of time. Supply and Demand essaysSupply and Demand; The Primary Controls in a Free Market System A free market system is the basis for supply and demand. Throughout history the base concept of supply and demand has not changed a great deal. Only through the evolution process of . May 04, · PURCHASING AND SUPPLY CHAIN MANAGEMENT. DEFINITIONS AND CLARIFICATION. PURCHASING. Purchasing is the act of buying the goods and services that a company needs to operate and/or manufacture products.
Importance in the determination of factors prices: Factor with an inelastic demand can always command a higher price as compared to a factor with relatively elastic demand.
This helps the trade unions in knowing that where they can easily get the wage rate increased.
Bargaining capacity of trade unions depend upon elasticity of demand for workers services. Determination of sale policy for supper markets: Super Markets is a market where in a variety of goods are sold by a single organization.
These items are generally of mass consumption. Therefore, the organization is supposed to sell commodities at lower prices than charged by shopkeepers in the other bazars. Thus, the policy adopted is to charge a slightly lower price for items whose demand is relatively elastic and the costs are covered by increased sales.
Pricing of joint supply products:Many students find essay writing to be an especially daunting task.
Depending on the essay topic, research can take anywhere from a few hours to several days and . Supply and Demand Factors Understanding supply and demand is the underlying foundation of all economics.
The term demand is used to indicate consumers’ willingness to buy while supply indicates willingness to sell.
May 04, · PURCHASING AND SUPPLY CHAIN MANAGEMENT. DEFINITIONS AND CLARIFICATION. PURCHASING. Purchasing is the act of buying the goods and services that a company needs to operate and/or manufacture products. Published: Mon, 5 Dec The following essay helps us know what demand and supply concept and that we are explaining with the example of cigarette industry.
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Determinants of Demand and Supply. Sustained economic growth, low inflation and resultant low interest rates start to increase mortgage demand and put pressure on house prices. Comparing cities doesn't offer accurate postulating because price-to-income and price-to-rent ratios vary widely from city to city/5(1).