AbstractOver the years, products and their costs have been subject to various laws and factors affecting their prices. From the smallest item people purchase to the most capital-intensive products and manufactures, economics and their laws have often been used in the patterns by which the product is bought. Also over time these products have seen changes in their utility as well as in their consumption levels.
What accounts for these changes in consumer purchasing and patterns? Consumer Patterns: definitionsBefore we discuss the parameters of the changes in the patterns of consumers, we must seek first to define the basic terms that will come into play in the discussion of the topic. These terms will lay a good framework by which we can better get a grasp of the concepts that will be laid out in the paper. Many of these terms are of an economic nature; the need to define them is important to the discussion of the paper so the topic can be better discussed, evaluated and understood.What is Economics?Economics can be defined as a study conducted in the filed of academics that measures the capacity of various individual and collective bodies, either individuals or entities such as corporations, business concerns and government aligned groups or corporations and even the ability of different countries to apportion scarce and limited funds and resources to meet insatiable demands (Economypedia, 2008).
An economy, therefore, is the total amount of good and services consumed and the production modes and their relationships with each other (Economypedia, 2008). In common usage, the term economy is used when referring to the activities that are seen in one particular region in the world (Economypedia, 2008). In particular, this can mean economic activity in a specific country such as the United States, or a state-level of economic conduct, such as that in California or New York (Economypedia, 2008).Also, economies can be seen at city level, such as San Francisco, or at a collective inter country stage, such as that seen in the European Union (Economypedia, 2008).
This study of economies can provide a glimpse of the conduct of a particular country or group of nations apportion their resources and how the laws of supply and demand will impact such activity (Economypedia, 2008). This activity can be broken down into two major study groups: macroeconomics, which focuses on the deportment of the integral economy, and microeconomics, which centralizes its attention on the single consumer (Investopedia, 2008). In the study of economics, there are two theoretical schools of study: the classical approach and that school associated with British economist John Maynard Keynes, hence the term Keynesian economics (Investopedia, 2008).In the school of Keynes, it is the government that is promoting the assurance of economic advancement and economic stability (Investopedia, 2008).
This is done via its intervention in the free market and the development of sound money policies (Investopedia, 2008). To students of Keynesian economics, the burden of ensuring the smooth operation of business (Investopedia, 2008). The intervention earlier mentioned is by the collection of taxes, giving tax cuts to business and increased state spending activities to boost the economy (Investopedia, 2008). In times where inflation is high, government is encumbered with the task of reining in expenditures and increasing revenue rates (Investopedia, 2008).
MicroeconomicsMicroeconomics is a part of economic study that researches the methods by which individuals, private companies and family groups arrive at decisions in rationing out their meager and limited spending money to satisfy various needs in their everyday living (Economypedia, 2008). The study is conducted in the context of the market where products and services are bought or availed of (Economypedia, 2008). The branch of microeconomics also tackles the impact of the decisions of the abovementioned entities on the demand and the corresponding supply of these goods and services in a given market (Economypedia, 2008).MacroeconomicsIn contrast to the field of microeconomics, wherein the parameters of the branch is more concerned with the individual components of the economy, the branch of macroeconomics deals with the broader elements of the economy, such as the total income of the country, collective savings, consumption and expenses, employment rates, investment figures and total supply of money in the financial system (Economy Watch).
Macroeconomics also deals with the size of the factors that determine these elements and the change of these factors over a given period of time (Economy Watch). In short, macroeconomics studies the sway and trends present in the core economy, or the whole economy (Investopedia, 2008). Often times, the factors that are researched and determine microeconomic and macroeconomic rates will often come into play with each other (Investopedia, 2008).Law of SupplyIn the statutes that govern the study of the field of microeconomics, this law states that, all variables in equilibrium, when the cost of a good or service increases, the amount that producers or manufacturers churn out will also increase and this is also demonstrated inversely (Investopedia, 2008).
In essence, if the price that is paid by consumers for the particular good or service that they produce or offer, suppliers will seek to optimize their profits by increasing the amount of the products on the market (Investopedia, 2008). The field of macroeconomics deals with economies on the larger plane, as the conduct of economies as it relates to nations, geographic regions and corporations or country organizations (Investopedia, 2008).Law of DemandInverse to the law of supply, the law of demand states, that all factors being in equilibrium, if a product’s cost goes up too steeply, the people will want that product (Answers, 2008). In short, if the price of a good or service, the decrease in the demand for that product or service will be seen (Answers, 2008).
For example, if the price fro a certain brand of food item will increase, then the demand for that product by the consumers will naturally decrease (Investopedia, 2008). People will hence start to avoid the purchase of the product and channel their funds to more necessary items (Answers, 2008).Factors that lead to a change in supply and a change in demandIt is the explanation in this discussion that when the demand for a commodity goes up, the first effect is the price of that item consequently goes up (Dr. Irwin Kellner, 2007).
But if the supply outstrips the demand, then the pressure is put on the price of that product (Kellner, 2007). In the article, the author cites the housing and health sectors; the trend is that the prices of these products will tend to rise (Kellner, 2007). In both industries, the rise in demand in these areas of the economy did not translate into higher quantities of supply for consumers (Kellner, 2007).The scenario in both industries displays the anomaly in the operation of both laws.
In the housing sector, even though there is a rise in the demand for houses, the house builders first need to secure all legal permits, buy the supplies and hire crews for construction (Kellner, 2007). In the helath sector, the supply of additional doctors and hospitals and the development of new medicines take time (Kellner, 2007). This will continue to be the case even if prices continue to rise (Kellner, 2007).ReferencesAnswers.
(2008). What is the law of demand? Retrieved December 19, 2008, fromhttp://answers.yahoo.com/question/index?qid=20080916180736AAdcICREconomypedia.
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investopedia.com/dictionary/default.aspKellner, I. (2007).
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