Example of demand and supply movement: Wool Price

The price of wool faced a decline since 1985 because of technology innovation that leads to a decrease in demand. The technology innovations are cotton and synthetic fabrics. More buyers shifted their demand in buying wool to buying cotton and synthetic fabrics, which benefited them in a better deal. The shift in the demand curve cause movement along the supply curve, and thus resulted in a lower price.

In 2016, the price of wool increased after 30 years of decline. This increase of price resulted from a harsh winter and less feed, which leads to a decrease in supply shifting the supply curve to the left. The shift in the supply curve cause movement along the demand curve, and thus resulted in a higher wool price.

Link: http://www.stuff.co.nz/business/farming/sheep/76146110/Wool-prices-on-the-riseFullSizeRender

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Why Dairy Demand has Become More Elastic

In recent history, economists have viewed the market for dairy as relatively inelastic, in that goods such as milk, butter, and cheeses have varied very little with the change in price, and that they were seen more as necessities. Recent data has now shown the opposite effect to be true, in that higher prices have shown to have a direct effect on the consumption of dairy products, ultimately causing the demand for these products to decrease. Dorland, an economist who holds an MBA in both business and finance stated that historically a good amount of the dairy product went to the government, which had kept the prices stable in the market, causing milk and other dairy products to be held within a relatively tight price range. Today the government does not hold as much power over the dairy market, in addition to the fact that the there are now many more beverage alternatives with more reasonable prices.

Consumers have shown to be more price sensitive in terms of fluid milk, but less so with butter and cheese, in that consumers tend to always have a high demand for these particular products despite the price. There has also shown to be an emerging health concern in terms of margarine and butter substitutes, causing consumers to switch back to butter ultimately increasing the demand. In terms of the commercial restaurant sectors, such as McDonald’s, as the price of dairy continues to rise the demand of products such as cheeseburgers and others that involve dairy goods tends to decrease. This article ultimately shows that with the changing elasticity of even a small specific section of foods, the demand in the larger market as a whole that utilizes these goods, such as dairy, ultimately changes, and in some cases drastically. Dairy is increasingly becoming a more attainable good, and the decreasing prices makes it more available to a wider range of consumers.http://www.agweb.com/article/why-dairy-demand-has-become-more-elastic-naa-catherine-merlo/


Demand for Cable TV in Constant Decrease

Cutting the Cord – The Economist

Since 2013, traditional (200 channel bundles) cable subscriptions, along with “television viewership,” are decreasing progressively. In fact, people are switching to online streaming services such as Netflix and Hulu.

This showcases some important economical concepts. Namely, the demand for cable TV is decreasing because the price of its substitutes (Video streaming services, skinny bundles… ) is much cheaper and more available in recent years than it has ever been.

Further, this shift from cable TV to streaming services showcases the effects of a downward pressure on the price of television. Indeed, the large bundles of channels creates a surplus in the quantity of channels supplied (viewers watch on average 17 channels while the bundle offers 200 channels),¬†therefore, viewers switch¬†to on-demand services and skinny bundles for cheaper prices and less “wasted” content.

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