Essay Preview: Economics Case
Report this essay
How this whole world runs is based on the economics from country to country. Economics is the cause and effect of everything from; unemployment, bankruptcies, corporations going under, individual consumers, and the list goes on and on. Every aspect of business and society is related to economics.
With economics lie 3 central problems: what to produce and how much, how to produce it, and who do you produce it for. In our society, especially in the United States, we have one of the strongest economies in the world. In the past year or so, Americas economy has started to slip. For example, it kind of started with the bailouts of the major banks in the U.S. The major banks started to fall and fall fast. The banking system is a huge factor of our economy and business. It is where our money comes from really. Real Estate loans, Business loans, Stock Market, etc. The major banks hold our economy together. This is why some think it was necessary to bail these banks out and put America further into an unimaginable deficit. Economics is a broad study of supply and demand.
Law of Supply
The law of supply is a simple concept. It is based off the expectation of profits and substitution when needed. It states that as the prices rise of a good lets say, the supplied quantity is going to rise as well. According to Investopedia-Forbes Digital Company (2009) that the law of supply is, “a microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services offered by suppliers increases and vice versa”. It also states, “As the price of a good increases, suppliers will attempt to maximize profits by increasing the quantity of the product sold”. So an example would be if there was a pair of shoes that Nike sold that all of the sudden the price went up for whatever reason, Nike would in theory start producing as much of that shoe as possible to potentially maximize their profits.
Law of Demand
The law of demand is also simple to understand. According to Investopedia-Forbes Digital Company (2009), the law of demand is, “a microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease and vice versa”. It is simple if you think about it. To use Nike as an example again, if a popular pair of shoes went up in price, the demand will go down and not as many of that particular shoe will be sold. It is the same for everything, food at a restaurant goes up in price, not as many people will eat there anymore. When price drops on something the demand goes up and vice versa. Its as simple as that.
Changes in Supply and Demand
Lets talk about the different factors that can cause changes in supply and demand. There are