1.
Throughout my essay I will be distinguishing between a shift of the
demand curve for a product and a movement along the product’s demand curve with
definitions and examples of each term mentioned in the question. I will also be
showing some diagrams to support my answer.
The term ‘Demand’ means that it is the quantity of a good
(or service) that consumers can and are able to buy at a given price in a given
period. For example we can say a store buys 500 apples per week at 10 cents,
therefore we can say that the demand for
apples in a week at a price of 10 cents each is 500 units in a week. A
shift of the demand curve to the left
signifies that the demand for a particular good (or service) has decreased less
than before. A shift of the demand curve to the right signifies that the demand of that particular good (or
service) has increased greater than before. The law of demand states that “as
the price of a product falls, the quantity demanded of the product will usually
increase, ceteris paribus”. Ceteris paribus assumes that when there
are different numbers of factors that determine something, only one is changing
and all of the others remain constant. So for example, as the price of the
apple falls the demand of it will increase because more people are willing and
able to buy the product, not because you want to buy it means you are able to
buy it. The increase in demand happens for two reasons, income effect means that when the price of a product (or service)
decreases, people have an increase in their ‘real income’, so people are more
likely to buy more of that product (or pay more of a service) since it
increased its real income.. For example if the price of apples was 1 dollar
each and after it is 50 cents then the real income of a person will increase
because now they can buy 2 apples with one dollar. The demand curve for income
will shift to the right because income rises. A substitution effect means that when the price of a product falls,
then people want to buy that product and no other similar products, whose
prices have stayed the same, so it is more likely people would buy more of that
product, substituting it for products that were previously purchased. For example,
the company of ‘Grandmother’s apples’ sells their apples for 3 dollars a sack
and the company of ‘Momma’s apples” sells their apples for 3 dollars. ‘Grandmother’s
apple’ now sells their apples for 2.50 dollars a sack, therefore ‘Momma’s
apples’ will be substituted and the demand for ‘Grandmother’s apples’ will
increase. The demand curve for ‘Grandmother’s apple’ will shift to the right and
the demand curve for ‘Momma’s apples’ will shift to the left.
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A movement along a demand curve is caused by a change in
the price of a good (or service). As price decreases the movement would be in
the right and as price increases the movement would be in the left. When the quantity
decreases it is known as contraction. Contraction is when in a period of time
goods decline. When the quantity increases it is known as expansion. Expansion
is when there is an economic growth. This can be affected by substitutes
mentioned before because a change in a price of one product will change the
demand of another product. For example if there is a fall in the demand for
pork, then there will be an increase in the quantity demanded and a decrease in
the quantity demanded for beef, this is a substitute. This means there will be
a movement along the demand curve for pork and the demand curve for beef will
shift to the left.
.jpg)
Other factors that affect the demand for a product are the size of the population, changes in the
age structure of the population, changes in income distribution, government policy
changes, and seasonal changes. If the size of the population increases then
the demand for goods and services will also increase as more products and
services are demanded, so the demand curves will shift to the right. The changes
in the age structure of the population can alter the economy and affect the
demand for certain products, for example if the percentage of babies start to
increase, then there will be more dippers or baby toys and the demand for those
products will increase, as well as the demand for skateboards will decrease and
the demand curve will shift to the left. When there is a change in income
distribution, for example when poor get economically better and the rich get
into an economic crisis, the demand curve for sugar can shift to the right
because there is an increase for basic necessity goods. Government policy
changes such as banning smoking in public places affect some markets. Seasonal
changes can increase the demand of a product, for example, in winter the demand
for coats increase and the demand for swimsuits decrease.
2.
The demand for bicycles might increase because of changes in the age
structure of the population and government policy changes.
If the percentage increase of kids in an economy, the
demand for bicycles will increase for Christmas and in normal dates too, as
kids may ask for a bicycle for their birthdays or for Christmas. Therefore more
bicycles are demanded and the price decreases.
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Since there is a percentage increase of kids in an
economy, the demand for walking frames may start to decrease and shift to the
left in a demand curve. The quantity demanded decreases and the price
increases.
If a government creates a policy saying that the price
for ‘school bus services’ are going to increase, parents might send their child
with a bicycle instead of paying more than they used to pay for the school bus.
Therefore the quantity for bicycles increases and the people taking the school
bus decreases because the price increased.
Jacqui, for answering these questions, you have the right answers and explanations as you have used examples for every term you define. I think that it would be good if you add the graphs under each definition instead of having the two graphs at the end of the question. By the previous thing said, i mean that when you say ``A shift of the demand curve to the right signifies that the demand of that particular good (or service) has increased greater than before´´, I would have added the graph right under it to make it clear and the same thing for the shift to the left. By this, I mean that you could have done the same thing as with ``movement along the demand curve´´.
ReplyDeleteIn the first question, it sometimes became confusing because from shift to the right, you start focusing on to other factors that affect the demand. I would use more paragraphs to separate the different ideas, for example, using one paragraph for the ``shift to the right´´ and another one for ``shift to the left´´. Your definition for ``movement along the demand curve´´ was clear enough to understand it as you added what expansion and contraction means.
For the second question, I think that you used the correct examples with the correct graphs. For the change of the age structure of the population and government policies, I would have expanded more those concepts by having the definition you have in the last paragraph of the first question in the second question. In my last opinion, I think it would be helpful since it would help the reader understand that concept more clearly.
Overall, your post is good, and the graphs used helps the reader understand the different concepts being defined.
Fátima Crespo
Hello Jacqui! I just wanted to say that you put great effort into this and I can definitely tell you weren't lethargic. However, I must comment on how you answered the question.
ReplyDeleteFirst of all, I was a bit confused when reading your post. I had to read the huge first paragraph a few times to understand what you were trying to say... Maybe next time you should divide it a bit more to help the reader understand? You can do this by making a clear intro, then organize different ideas into different paragraphs.
Personally, I don't feel like you emphasized on the fact that ONLY price affects movement. In your hefty first paragraph, you kept mixing price and shifts in the demand curve which may confuse a reader trying to understand the concept. Your information was correct however, the question was asking you to differentiate a movement along the curve and a shift of the curve; which wasn't accentuated. This, again, refers to the idea of separating your ideas!
The graphs were great but I would have placed them immediately after the explanation. "A shift of the demand curve to the right signifies that the demand of that particular good (or service) has increased greater than before." Then insert the graph that shows that! :)
What I really like was the second short paragraph. It was short and easy to understand. I think you should have done all your paragraphs in that matter. You also taught me new terms... "Contraction is when in a period of time goods decline. When the quantity increases it is known as expansion. Expansion is when there is an economic growth." That was excellent!
Your last two paragraphs for the first questions clarified the ideas therefore it kind of made up for the first paragraph. Also, your second question was exceptional! You were organized and I understood it immediately, especially with the diagrams!
Overall, it was a great post nonetheless organization is something you must work on for the next post! Maybe make an essay plan before writing? That is what I do because I have the same problem! I'm sick today Jacqui so I can't congratulate you in person!
Love you xx
-Matthew Bocanumenth