Individual_Supply_and_Demand_Paper

Week Two XECO/212 Individual Supply and Demand Paper Robert Eaton University of Phoenix * * * * * * * * * * * * * * * * * * * Buying a new home is challenging enough without have family adding their opinion. There are many opinions coming from lots of different people, buy in this neighborhood and not that one. The ideal location is something everyone should think before making a discussion. Children should be first priority of which school is best for their future. The right school will not only help in their studies, but in their future. When subdivisions are built in areas with better schools the cost for new homes can increase in price. Everyone is searching for the best schools. The media has become aware of this practice by advertising for particular locations, just to entice new families. A particular home in one neighborhood would cost considerably higher than a not so established neighborhood, even for the same type home. The relationship between demand and supply underlie the forces behind the allocation of resources. In market economy theories, demand and supply theory will allocate resources in the most efficient way possible. A family willing to relocate to another city may not have the same opportunity as others. The need for substitutes is another option should be considered, apartments would be one substitute. A family could be just as comfortable, with the same square footage. The comfort level is the same, but the location may differ. The same could be considered for location in schools. On the other side a family could try locating a multi-family home, to share the cost. There are other factors that influence the amount of a particular home that people are willing to buy, such as the number of consumers in the market and their expectations about future prices, incomes, and quality changes. To get a complete list for any product might be time consuming and difficult, but it is not necessary because we want to focus on the relationship between price and the quantity of a homes that people are willing to buy during some interval of time. To do this, we will assume that all other factors are held constant. Increases in people's incomes raise consumption of most products. There are some homes, however, that people use less of as their income increases. Public transportation is an example--as people's incomes rise, they stop riding the bus and drive their own cars. New homes were once another example--people with higher incomes bought them less frequently than people with lower incomes. It was because they were a symbol of "working-class" apartments that they were adopted by the radical left in the 1980s, and from there they moved into high price homes. The amount of income a person receives affects the cost of buying an item because it determines which options a person must give up when buying a product. If a person with a low income spends $5000 for a trip around the world, he will have to cut back on food, clothing, or shelter. The same trip will cause a person with a high income to cut back on a very different set of options. The most obvious cost a person bears in buying a home is the price of the location. Price reflects cost because people have a limited amount of funds that they can spend, and if they spend their money on one thing, they cannot spend it on another. When the price of living goes up, the amount of other things that a person must give up in order to buy the location rises. Every home in the marketplace has substitutes and complements. A substitute is another product you might buy if the first home is too expensive. Apartment is a substitute for home. If you're a construction worker and the price of new homes goes up, the people will want cheaper living, and you will sell more. To lessen the impact of these factors, it might seem reasonable to expand the housing market by simply reducing prices. Price represents one attribute that consumers evaluate when purchasing a home or apartment. In fact, price plays one of two roles in the purchase decision process for consumers. First, consumers might use price as a measure of product quality. That is, when quality is associated with higher prices, price can become an incentive to buy. Examples of this type of practice include David Weekly US Builders and Custom Homes. Alternatively, consumers might buy more of a newer home at lower prices and less at higher prices, all other things being equal. Model home locations such as different cities are examples of this type of practice. The purpose of this paper is to introduce the concept of price elasticity of demand to the reader as a way to understand the purchasing behavior of consumers and its application to hearing aid pricing. *