Economic Model Of Price Determination In A Market Economics Essay

Economic Model Of Price Determination In A securities industry Economics EssayAs an economic model of footing purpose in a mart, the relationship between come forth and withdraw is a military issue creation discussed for a long time. We may trust of subscribe to as a force which tends to increase the charge of a good, and as well as that add on as a force which tends to reduce the worth.According to the microeconomics possible action, the price P of a product is determined by a rest period between production at each price ( allow for S) and the desires of those with purchasing effect at each price ( determination up D).It concludes that in a competitive market, the unit of measurement price for a special good pass on vary until it settles at a point where the quantity demanded by consumers (at current price) ordain play off the quantity supplied by producers (at current price), go awaying in an economic equilibrium of price and quantity.When the two forces bala nce integrity a nonher, the result testament be that the price neither rise nor fall, moreover stay stable. This is the analogy that leads us to think of the stable or natural price in a particular market. It is called the equilibrium price. As we know, iPh unmatched now has plucked great attention and become a heated topic. Here, we take it for representative if every consumer wants and can afford an iPhone, and apple Comp any(prenominal) is willing to provide each of them one iPhone, the demand and lend is in equilibrium status.In addition to the theory above, is in that location any relation among supply demand and the market? How to measure the relation? Is at that place anything else to measure the functions of supply and demand in market? Or they involve somewhat links when influencing the market? There atomic number 18 triad theses concerning this topic for further discussion.The first thesis I sire chosen is create verbally by David Huffman. The author insis ts that supply and demand is measurable. (Another thesis I cite under is the opposite ) He tries to resort to retail Market organise to addresses these questions beca custom he thinks the database of Retail Market Place can provide a direct comparison between retail sales and consumer spending by industry and it can thitherfore measures the gap between supply and demand. In his thesis, he holds the view that at that place be two ways by supply or demand to measure activity in a retail market. The name is mainly divided into three parts to come across into this topic Market Supply (Retail Sales) Market Demand (Retail Potential) The wetting/ wastefulness Factor (Supply and Demand). One point must be emphasized is that Leakage in an area represents a condition where a markets supply is slight than the demand. For such factors, it seems that to measure the market by using supply and demand as a tool is doable and useful.There is another thesis by an anonymous author also dis cusses the relation of supply, demand and market. Ordinarily, there always exist several(predicate) price levels where individual buyers and sellers are at ease so that the sum total will create a market or equilibrium price. But in globe, there will be some exceptions, because a market price is not a plum price to all participants in the marketplace. Not alone when there is no increase in the quantity of product demanded, but also when there is a commute in demand due to changing consumer preferences will influence the market price and reach a new equilibrium. So does the reaction to the short run or long run changes. The charts below are separately describing change in equilibrium price and shift in demand.In most regions, iPhone is not only a prison cell phone but more(prenominal) than an apparatus of making telephone calls and theme text messages. iPhone has been a symbol of some players, and tidy sum distinguish their individuality from using iPhone They have a keen u nderstanding of popularity They enjoy being a member of their circle and they like communicating with real friends or net friends They eagerly break the tradition and desire something new though the price of iPhone is high enough to restrain most consumers, many hatful choose iPhone for proving themselves different. Such relation of supply and demand decides that iPhone occupies in the utmost End of the market. If the price of iPhone decreases, on one hand, it will surely attract more consumers, but on the other hand, many previous buyers will quit because iPhone is no longer unique and rare.But in the article written by JUSTIN WOLFERS in 2009, the author argues that supply and demand are difficult to measure. At the very beginning of the article, the author raises the question of Catherine Rampell, Does threatening the price of broadband increase its use, which brings a research and a serial publication of data and diagram trying to figure out the demand coil.However, the real ity is always beyond the theory only in the textbook. Sometimes to our surprise, the result is different though the source of data is the alike. The author gives an example to beautify it a supply-obsessed economist were interested in asking Does increasing use of broadband raise its price? so that he might examine data on broadband prices and adoption rates. He expects to see more broadband correlated with higher prices because the supply curve is upward pitch but undoubtedly the result will be opposite for a demand-obsessed economist.As we know, there are many types of factors taking effect. On one hand, the determinants of supply include production costs, the technology of production, the price of related goods, firms expectations to the highest degree future prices, number of suppliers, etc. On the other hand, the determinants of demand integrate income, tastes and preferences, prices of related goods and services, expectations and number of Buyers. Whats more, it is believ ed that factoring in of Marketing also has something to do with the curves because marketing drives demand in some way.In a simple variety of historic and current examples, we find more and more testify that with shifts in demand or in supply causing changes in price and quantity, we can explain changes in quantities as well as prices as the equilibrium of supply and demand. The changes in price and quantity are coordinated in many ways that can be not only understood but also predicted, at the premise that we go through the theory of supply and demand. As the topic of the article, the author thinks that the factors influencing the equilibrium are far more complicated so Supply and Demand be Hard to Measure. To some extent, that is because prices and quantities are determined by both supply and demand.The author has a new idea that nationality has influence and it indeed makes a difference. It is pointed out that prices and quantities differ across countries, which breaks the tr aditional theory of If both curves were the same in every country, broadband prices and use would be the same in every country. Some people may even argue that income skews the fortune cost of broadband ownership.It seems strange that iPhone sells extraordinarily well Mainland China. Maybe you will surprise that in such a developing Asian country, though a small portion of people can lead a tremendous change. Its true, and its certain that China has been the greatest purchasing power only after the USA on luxuriousness goods, let along iPhone.Consequently, what makes supply and demand hard to measure is the reality the world is indeed a mixture of both cases. The author owes this to an identification problem, with a bit sense of humor, which arises precisely because prices and quantities are determined by both blades of the supply and demand scissors.The example of iPhone indeed proves that demand and supply are hard to measure. many a(prenominal) people bought iPhone not because they need it but for other reasons. Some bought for retentiveness up with the latest trend, some bought because other people recommended, some bought for showing off, and some bought for having a try Here comes the consequence of over demand. Whats more, if the apple Company restricts the supply so that iPhones seem scarce to consumers, many people will squeeze and swarm forward to get simply one iPhone, even late at night before its release. Some luxury companies also promote their articles in limited edition and as a result supply and demand is unequal.We can bring the same example to every day life. If we compare the price of water to the price of diamonds, there is a dramatic difference. The price of water is very cheap and we use it everyday, not only for drinking, but also for washing cars, watering plants, and for flushing the toilets. nigh importantly water is crucial for our life. Diamonds on the other hand, has no remarkable influence to our lives other than showing off. Diamonds are for sure luxury products, but its components are simply carbon. If we live with that the price of water is extremely expensive, would we even so use water to wash our cars or flushing the toilets? If the price of diamonds are as cheap as water, will people good-tempered ware it on their fingers or as an engagement gift? It all comes down to the theory of scarcity. Water is cheap simply because its easy to get and the world has ample of it, diamonds are expensive because it takes millions of years to form and its hard to find.Generally, there is still something worth digesting after reading and some problems remain unsolved. With much doubt, some readers raised a list of questions. For instance, supply and demand curves must be linear? If supply and demand curves shift around in different geographical regions, or in different periods of time, then shall we get to assume that economic equilibrium is well-defined? Whether the author assumes the shifts occur becaus e of how preferences are distributed or because preferences change, it seems that theres no guarantee that exchanges are approaching an efficient allocation of resources The three theses above have a sequence from concrete to abstract. In fact, in the marketplace, it is rarely possible for supply and demand to go the path we have designed. On one hand, supply and demand can be use to describe and measure the market, but on the other hand, for the factors are numerous, the curve is a result of price and quantity as well as a combination of demand and supply, and surely these reasons make the relationship of supply and demand hard to measure.