Archive fordemand

The reason Americans are spending less

This Washington Post article lists a variety of reasons why and how Americans, both young and old, are saving their money, even with the impending holiday season. Many of the reasons relate to shifts of and along the demand curve. The first reason given is that people do not have as much money to throw around, probably because people’s general incomes are lower, meaning a shift in demand to the left. The second reason is that people are expecting a raise around the holidays. This means that people expect to have more money in the future, so are holding off, meaning a future shift to the right, but a current shift to the left. Other people are worried about a stagnant income and the state of our economy. This article clearly demonstrates how income and expectations affect the demand for goods.


Why Drop in Oil Price Could Squeeze U.S Economy

The following article talks about how a decline in the price of oil could inversely affect the oil industry and the economy in general of the United States. Such price drop, created when there is plenty of supply but not enough demand, is a good sign for the consumers and acts as an economic growth uplift, but it can also hurt the US exports, spending and employment. Through a comprehensive and easy-to-follow analysis, the article points out the implicit downsides of the reducing fuel price by touching on several familiar topics that we have learned in class, including supply & demand, exports & imports, global supplies, change in price, etc.


Price and demand increase of fruit in southern India


This article, posted in December 2013, deals with price increase and demand for fruits in India. There had been many changes during this crop season: prices for apples and grapes have increased, there had been a shortage of bananas, and the supply of oranges grown had increased. Due to the higher prices of apples and grapes and the shortage of bananas (causing bananas to become more expensive), oranges became the more popular fruit in southern India. Oranges are being sold at RS40 per kg, while apples are being sold at double the price of oranges.

Demand is a big factor during these rapid changes. Due to the high demand of oranges, importation of oranges had greatly increased. Even though more oranges were imported than previous years, the charge to transport this fruit did not increase.The rise of oranges imported is evident by the massive amount of oranges being imported to markets in India. The main market in Chennai receives about 150 tonne daily and the Kochi main market receives 100 tonne daily.Liaqat Ali feels it is still too early to predict supply and demand though. “We have to wait till January-February when the demand goes up.”

Will these prices become permanent and will the demand for oranges stay this high for years to come?




Tesco market value failure

Tesco is a multinational grocery and general retailer that is headquartered in the UK. In the last year it experienced a major decrease in market value by 50%. This business failure not only affected its employees but also UK’s citizens that rely on Tesco’s financial contributions to UK’s pension funds. This also negatively affected citizens’ savings and the government’s tax income.
Sources of Tesco’s collapse included faulty recording of accounts (deals with suppliers and when costs were paid), and competition with Aldi and Lidl.
Market failure stunted economic development of external parties, and severely impacted UK’s total economic growth and productivity.
This article directly connects with our lessons about market productivity, impact on external parties, economic growth and development, and the general idea of cause and effects of market behavior in the world of microeconomics.



If the team does well, so does the city

This article explains the effect of NFL game performances by teams and how this affects the prices of tickets. The San Diego Chargers have been doing extremely well this season and therefore the attendance to games has increased significantly. Tickets at the beginning of the season cost an average of $177.06 on the secondary market but after their consistent wins on the field, the price of tickets has now increased to $219.20, “a 23.8% increase in five weeks,” which is astounding. Go Chargers! The Buffalo Bills have also been playing very well and their tickets have had an 8.5% increase in price on the secondary market. Unfortunately for the New Orleans Saints, whose performance has disappointed so far this season, tickets have dropped from an average of $268.53 to $250.14, a 7% drop.
This trend in prices displays the effect of expectations on the demand market. Because supply for the tickets of these games is constant, the better or worse the home team performs affects the quantity demanded. When they perform well, this causes the demand curve to shift up and to the right, therefore creating overall higher priced tickets. When a team plays poorly, the demand curve shifts down and to the left instead, creating a lower ticket price. This shows that not only does team performance affect the prices of tickets but how much American Football is a major element and pastime in our domestic economy.

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Recent Drop in Ethanol Price

A recent drop in the demand for ethanol has sent prices lower than they have been in up to four years. In class we studied the concepts of supply and demand and their impacts on the price of a product or good. In this article we can see that there is a clear surplus of ethanol which is causing the price to decrease significantly. A price drop in ethanol isn’t bad news for consumers of gasoline due to the fact that they are close compliments as standard gas is made up of 10% ethanol. While US citizens enjoy the price drop acts as a detriment to Ethanol makers. However, in recent history the ethanol industry has experienced a market that fluctuates heavily so this fall is something that the producers can recover from.


Decline in World Prices for Oil

As this article explains, the worldwide oil market is currently experiencing a significant decline in prices. Part of the decline is linked to the slowing rate of economic expansion in China and Europe, meaning that people living there have less disposable income to spend on gas. This results in a decrease in demand, or, on an economic model, a leftward shift of the demand curve. There is also a much greater supply of oil, particularly in America. Domestically, this shifts the supply curve to the right. For other oil producing countries, this means another leftward shift in demand.


For the overall market, the leftward shift of the demand curve and simultaneous rightward shift in the supply curve creates a surplus. Saudi Arabian suppliers are attempting to reach equilibrium in the market by cutting prices. However, while Saudi Arabia’s market can afford to be relatively elastic, many producers have invested in projects to increase the supply of oil in response to expectations of higher prices in the future. In the long term, producers are likely to invest money in other areas and eventually decrease the supply, but for the time being, the surplus only continues to rise. In all, consumers are better off thanks to lower prices. However, producers stand to lose a lot of money, as the oil they invested trillions of dollars into producing is being sold at ever-lower prices.


Amazon Ebook Prices Decreasing?

This article explains Amazon’s ideas for decreasing the price of their ebooks. By dropping the price of regular ebooks from $14.99 to $9.99, the company hopes to increases sales by a whopping 74% – from 100,000 to 174,000 in the example given.

Amazon is trying to increase demand and supply by lowering the price of ebooks and therefore creating a new equilibrium quantity and price for the ebook market. Other book sellers are not happy with this attempt, and consumers and authors just want to be able to sell their books already! Although the end result should be beneficial to all but Amazon’s competition, by the time the result actually comes around consumers and authors may be too angry to go to Amazon.

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Junk food taxes

Many articles, such as this one, reported the impact of Mexico’s junk food tax on snack sales by PepsiCo and Coca Cola, noting that sales fell by 3% as a consequence of the tax. This reduction in sales is what we would predict from our tax model. The article also notes that PepsiCo and Coca Cola are lobbying against similar taxes on sugary drinks in CA. This suggests that the supply side of the junk food market is less elastic than the demand side and fits with most studies that find the demand for junk food very price elastic.


Demand for Oranges Increases in India

The article talks about  the demand for oranges in southern India in 2013. The common people of southern India use to mainly buy bananas. But banana plantations were highly damaged the previous summer causing a shortage of bananas and their prices to rise. Grape and apple prices rose as well, with the apple prices being double the price of oranges. Due to all of these factors, oranges are a great substitute for the bananas, grapes, and apples, which causes the demand of oranges to rise. From 2012 to 2013, the demand rose greatly. This rise in demand caused the demand curve to shift up and to the right. Due to the shift of the demand curve, the equilibrium price increased as well. In 2013, the equilibrium price rose to 40 Rupees per kilogram of oranges (Rupee is the Indian currency).

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