Factors that determine demand and price
Questions
Describe the procedure by which a house decides how much capital equipment to lease. Explain what determines the rent of land. Supply illustrations where necessary.
What is demand? Explain the relationship between demand and monetary value. Discourse the other factors that can find demand. Provide illustration.
Introduction
MAIN BODY
Capital Equipment
What Determine the rent of a land
Decision
Introduction
MAIN BODY
Monetary value
Relationship betrween demand and monetary value
Factors impacting demand I
Factors impacting demand II
Factors that can find demand
Decision
Bibliography
Mention
APPENDIX I ( Demand Curve )
APPENDIX II ( Demand Curve )
APENDIX III ( Supply Curve )
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9 – 10
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15 – 16
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1.0 Introduction
Land are natural resource and its wages is rent. There is a difference between commercial and economic rent. The demand for land to be limitless, While its supply is absolutely inelastic ( or really inelastic ) . Commercial rent refers to the rent paid to the landlord who is proprietor of the capital such as a house, condominium, mill, auto or telecasting. When you rent a room or a house, you are paying commercial rent to the landlord.
Economic rent refers to the payment made in surplus of the payment needed to maintain the factor of production ”land ” in its current usage.
( Begg, David and Peter Smith, Economics 6th Ed, 2000, McGraw-Hill )
2.0 Main Body
Procedure By a Firm
Firms will merely demand for capital if the return from the said capital exceed the cost ( involvement ) of buying the capital, while family or investor are merely willing to offer the capital if the involvement receivable makes it worthwhile to put. Firms will ever look for the investing chance that offers the highest returns from among different investing options available. Once the house has invested in one venture, the staying chance will non merely supply every bit high a return. Therefore, as the house makes more and more investing. The return from the excess capital investing will bit by bit worsen. If the cost of capital represented by the interested rate so the house will be willing to borrow capital up to the sum.
( Begg, David and Peter Smith, Economics 6th Ed, 2000, McGraw-Hill )
Land And Rent
The wages for supplying Land is rent. Land refers to the natural resources form the Earth and includes the following first its Property for illustration, secret plans of land owned, Property is refers to the land component merely and that edifices built on the land is considered capital. Second is Natural resource that grows on the land for illustration, Agriculture as vegetable, fruits oil thenar, gum elastic, farm animate beings, and their green goods and more. Furthermore it is Natural resource that is extracted from the land for illustration, minerals such as crude oil, gas, gold, diamonds, fishes and other point from sea and more.
( Begg, David and Peter Smith, Economics 6th Ed, 2000, McGraw-Hill )
3.0 Capital Equipment
Capital equipment is an plus with an acquisition cost that exceeds a set sum. To be a capital plus, the point must besides hold a lifetime of more than a twelvemonth. The points typically are besides required to execute or help in bring forthing a merchandise, selling a merchandise, or supplying a service. Different establishments and companies may set the definition and acquisition costs to suit run into their demands. Equipment that you use to fabricate a merchandise, supply a service or utilize to sell, shop and present ware. This equipment has an drawn-out life so that it is decently regarded as a fixed plus. Capital equipment can include points that acquired in a figure of ways. The assets can be purchased, leased, or donated. There are some points that may look to run into the general demands but are by and large excluded from the class. These typically include land and package.
( K.Browning, edger ( 1996 ) microeconomic theory and application, Fifth Edition )
4.0 WHAT DETERMINE THE RENT OF A LAND
One manner to find the rental rate is to look and see what similar belongingss rent out for in the country. Another factor that can assist you find how much to bear down for rent is the operational cost. The operational cost is how much money you will hold to pay in measures in a monthly footing if you rent the belongings out. Some of these measures can be revenue enhancements, H2O, mortgage, and more. The rent you get from this belongings should pay for all of these disbursals and give you a little net income at the terminal of every month. One last factor that can assist you find how much to bear down for rent is how much suites and the size of the suites a belongings has. The more suites a belongings has normally the higher the rent will be. The size of the suites is of import besides, a big three sleeping room belongings can convey in more money than a belongings with four little sleeping rooms. Determining how much to bear down for rent can be a difficult thing to come up with. If you use the tips you read here it can do this determination a spot easier. ( For Assignment Purpose )
5.0 Decision
The decision, The defination of land and rent is normally referred to the definations foremost used by “ david Ricardo ” a nineteenth century economic expert, who was more concerned with “ how much rent is paid for a land as a whole ” instead than “ how much rent is paid for a land to be used for a peculiar intent “ Ricardo argued that the tolal of the land available is fix.
( Copyright of WEC, 1st Edition Principle Of Economic,2001 )
The supply of land is absolutely inelastic no affair how much rent is offered.The sum of rent will therefore be influence by the monetary value of goods produced from the land. A piece of land can be used for different purpose illustration, for agricultural intent ( farm or plantation ) Industrial intent ( Factories ) , commercial intent ( office blocks ) or residential intent ( house or condominium ) . The piece of land may alsobe left idle and unattended. ( For Assignment Purpose )
1.0 Introduction
Economic is a societal scientific discipline affecting scientific surveies on some facets of human society, ensuing in the preparation of assorted theories and principals that allows to analyse. Economicss may be defined as the survey of the jobs associated with the allotment resources to fulfill the limitless wants and demands of the consumers. The First Main thing for Demand is the desire to have anything and the ability to pay for it and willingness to pay. The term demand signifies the ability or the willingness to purchase a peculiar trade good at a given point of clip In general footings monetary value is a constituent of an exchange or dealing that takes topographic point between two parties and refers to what must be given up by one party ( Example Buyer ) In order to obtain something offered by another party ( Example marketer ) .Briefly means for Buyers is For those doing a purchase, such as concluding clients, monetary value refers to what must be given up to obtain benefits. In most instances what is given up is fiscal consideration ( Example money ) in exchange for geting entree to a good or service. Briefly what means for Seller is To Sellerss in a dealing, monetary value reflects the gross generated for each merchandise sold and, therefore, is an of import factor in finding net income. For marketing organisations monetary value besides serves as a selling tool and is a cardinal component in selling publicities. For illustration, most retail merchants highlight merchandise pricing in their advertisement runs.
( Copyright of WEC, 1st Edition Principle Of Economic,2001 )
2.0 MAIN BODY
Demand
The Basic and common for demand is what we want, we able to afford it, and have a definite program to purchase it. Privations are the limitless desires or wants that people have for a goods and services. Think of demand as your willingness to travel out and purchase a certain merchandise. For illustration, market demand is the sum of what everybody in the market wants. Businesss frequently spend a considerable sum of money in order to find the sum of demand that the populace has for its merchandises and services.A Incorrect appraisals will either ensue in money left on the tabular array if it ‘s underestimated or losingss if it ‘s overestimated. The sum of a peculiar economic good or service that a consumer or group of consumers will desire to buy at a given monetary value. The demand curve is normally downward sloping, since consumers will desire to purchase more as monetary value lessenings. Demand for a good or service is determined by many different factors other than monetary value, such as the monetary value of utility goods and complementary goods. In utmost instances, demand may be wholly unrelated to monetary value, or about infinite at a given monetary value. Along with supply, demand is one of the two cardinal determiners of the market monetary value.
( S.Pindyck, Robert ( 1196 ) Microeconomics, Third Edition )
2.1 Demand Curve
The sum of a good that a consumer or a group of consumer or a group of consumer wants to buy defused merely on the consequence of alterations in a merchandises ain per-unit monetary value, with other factor held changeless For Example, Consumers incomes ate taken to be invariant at all points on a peculiar demand curve.
( S.Pindyck, Robert ( 1196 ) Microeconomics, Third Edition )
2.2 The Law Of Demand
The Law of Demand states other things staying the same, The Higher the monetary value of a good, the smaller is the Quantity demanded.
Examples: Each Individual has a different demand for masticating gum because each individual has a different penchant for masticating gum. However, for each individual, the measure demanded declined as the monetary value additions. This is the general consequence called the Law of Demand.
( For Assignment Purpose )
2.3 CETERIS PARIBUS
Ceteris Paribus means those merchandise under immediate consideration are held changeless
The Example is When the Beef monetary value is Increase the demand will take down
( For Assignment Purpose )
2.4 Monetary value
Monetary value is the measure of payment or compensation given from one party to another in return for goods or services. Price is what a purchaser pays to get merchandises from a marketer. Cost concerns the marketer ‘s investing ( Example manufacturing disbursal ) in the merchandise being exchanged with a purchaser. Monetary value can sometimes instead refer to the measure of payment requested by a marketer of goods or services, instead than the eventual payment sum. This requested sum is frequently called the inquiring monetary value or offer monetary value, while the existent payment may be called the dealing monetary value or traded monetary value. For marketing organisations seeking to do a net income the hope is that monetary value will transcend cost so the organisation can see fiscal addition from the dealing. Finally, while merchandise pricing is a chief subject for treatment when a company is analyzing its overall profitableness, pricing determinations are non limited to for-profit companies. Not-for-profit organisations, such as charities, educational establishments and industry trade groups, besides set monetary values, though it is frequently non as apparent. For case, charities seeking to raise money may put different “ mark ” degrees for contributions that reward givers with additions in position ( Example name in newssheet ) , gifts or other benefits. While a charitable organisation may non name it a monetary value in their promotional stuff, in world these contributions are tantamount to monetary value puting since givers are required to give a part in order to obtain something of value.
( Knowthis ( 2002 ) , Principle of selling, retrieved on July 22, 2010 )
3.0 Relationship Between Demand And Price
The connexion between monetary value and demand is based on consumers look for the lowest possible monetary values, while manufacturers ( providers ) look to have the highest possible monetary value. But over clip, no one group dominates this relationship. As the market demand displacements in favour of one group to another, certain factors can be identified as holding a great influence on that displacement.
There are five basic alterations that can take topographic point in client demand for a merchandise. As they are nicely explained in our text allow us simply list them at this phase. They are, income of the client, population of the state, gustatory sensations of the client, outlooks and monetary value of replacements of other goods that the client privation to purchase
When you come to believe of it, it is astonishing that the merchandise or service we need or want seems to ever be in the market place. In a market economic system there is no cardinal commanding organic structure to guarantee that our demands will ever be supplied, but for some ground, they by and large ever are. Consumer sovereignty is the ground for this – the dominant function of the consumer in a market economic system finding what, how and how much will be produced.
In a market economic system, the outgos of consumers strongly influence the actions of concern people. If for some ground the corporate consumer decides non to buy a peculiar merchandise, but instead replacement for another similar merchandise, so the consumer is finally make up one’s minding what is produced in the economic system. The fact is that the manufacturer will merely go on to do a peculiar merchandise every bit long as the consumer continues to demand that merchandise. Once the relationship between demand and supply is broken in this respect, the manufacturer will be forced to rethink his place and act consequently.
( Knowthis ( 2002 ) , Principle of selling, retrieved on July 22, 2010 )
4.0 Factors impacting demand I
Important factors could impact a purchaser ‘s willingness or ability to purchase a good. Some of the more common factors are, Some fortunes which can do the demand curve to switch out include, addition in monetary value of a replacement, Decrease in monetary value of complement, Increase in income if good is a normal good, Decrease in income if good is an inferior good. These are the Some fortunes which can do the demand curve to switch in include Decrease in monetary value of a replacement, Increase in monetary value of a complement, Decrease in income if good is normal good, Increase in income if good is inferior good. ( Investor 2002, demand, retrieved on 22 July, 2010 )
Factors impacting demand II
The factors which can impact single demand there are three factors that can impact market demand it is alteration in the figure of consumer, A alteration in the distribution of gustatory sensations among consumer, A alteration in the distribution of income among consumers with different gustatory sensation. The monetary value of the good alterations, when a non-price determiner of demand changes the curve displacements. These “ other variables ” are portion of the demand map. They are “ simply lumped into intercept term of a simple additive demand map. ” Thus a alteration in a non-price determiner of demand is reflected in a alteration in the x-intercept doing the curve to switch along the x axis. This is a figure of factors that determine the demand curves are as follows. First are monetary values of related merchandises Its agencies complements-an addition in the monetary value of compliment will cut down demand, switching the demand curve to the left. Next is a substitute-an addition in the monetary value of a utility merchandise in increase demand, switching the demand curve to the right, Income- an addition in income displacements the demand curve of normal goods to the right, Number of possible buyers-an addition in population or market size shifts the demand curve to the right.
( Maarten.C, Janseen, ( 1993 ) A Critical Inquiry, Routledge )
4.2 Factors that can Determine Demand
Example services:
At peak times, the demand for rail conveyance becomes inelastic, and higher monetary values are charged by rail companies who can so accomplish higher grosss and net incomes
aˆ?The figure of close replacements for a good / singularity of the merchandise – the more close replacements in the market, the more elastic is the demand for a merchandise because consumers can more easy exchange their demand if the monetary value of one merchandise alterations relative to others in the market. The immense scope of bundle vacation Tourss and finishs make this a extremely competitory market in footings of pricing – many vacation shapers are monetary value sensitive
aˆ?The cost of exchanging between different merchandises – there may be important minutess costs involved in exchanging between different goods and services. In this instance, demand tends to be comparatively inelastic. For illustration, mobile phone service suppliers may include punishment clauses in contracts or take a firm stand on 12-month contracts being taken out
aˆ?The grade of necessity or whether the good is a luxury – goods and services deemed by consumers to be necessities tend to hold an inelastic demand whereas luxuries will be given to hold a more elastic demand because consumers can do make without luxuries when their budgets are stretched. I.e. in an economic recession we can cut back on discretional points of disbursement
aˆ?The % of a consumer ‘s income allocated to passing on the good – goods and services that take up a high proportion of a family ‘s income will be given to hold a more elastic demand than merchandises where big monetary value alterations makes little or no difference to person ‘s ability to buy the merchandise.
aˆ?The clip period allowed following a monetary value alteration – demand tends to be more monetary value rubber band, the longer that we allow consumers to react to a monetary value alteration by changing their buying determinations. In the short tally, the demand may be inelastic, because it takes clip for consumers both to notice and so to react to monetary value fluctuations
aˆ?Whether the good is capable to accustomed ingestion – when this occurs, the consumer becomes much less sensitive to the monetary value of the good in inquiry. Examples such as coffin nails and intoxicant and other drugs come into this class
aˆ?Peak and off-peak demand – demand tends to be monetary value inelastic at extremum times – a characteristic that providers can take advantage of when puting higher monetary values. Demand is more elastic at off-peak times, taking to take down monetary values for consumers. See for illustration the charges made by auto rental houses during the class of a hebdomad, or the cheaper trades available at hotels at weekends and off from the high-season. Train menus are besides higher on Fridays ( a extremum twenty-four hours for going between metropoliss ) and besides at peak times during the twenty-four hours
aˆ?The comprehensiveness of definition of a good or service – if a good is loosely defined, i.e. the demand for gasoline or meat, demand is frequently reasonably inelastic. But specific trade names of gasoline or beef are likely to be more elastic following a monetary value alteration
( Craig, Depken, ( 2005 ) Microeconomics Demystified )
5.0 Decision
Microeconomic theory is the subdivision of economic that Begin with the survey of the behavior of single economic units, Primarily consumers and concern house, and see how their determinations are coordinated through interactions in markets, In Analyzing the behaviour of market participants, economic experts make three premises its is self interested behavior, reason, and scarce resource ( Nicholson, Walter, ( 1998 ) MICROECONOMIC THEORY, 3rd Edition )
6.0 BIBLIOGRAPHY
[ 1 ] Wikipedia ( 2002 ) , economic sciences, retrieved on July 22, 2010
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[ 2 ] Tutor ( 2000 ) economic sciences, retrieved on July 22, 2010
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[ 3 ] Knowthis ( 2002 ) , Principle of selling, retrieved on July 22, 2010
From: hypertext transfer protocol: //www.knowthis.com/principles-of-marketing-tutorials/pricing-decisions/what-is-price/
[ 4 ] Investor ( 2002 ) demand, retrieved on 22 July, 2010
From: hypertext transfer protocol: //www.investorwords.com/1396/demand.html
[ 5 ] Faculty, ( 2002 ) graphs, Retrieved on July 29
From: From: hypertext transfer protocol: //faculty.icc.edu/instructionaldesign/econ/math/econGraphs.html