Supply_and_Demand

Supply and demand are the corner stone of economics. Demand is the amount of product or service consumers need or want. Supply is the amount of product of services that can be manufactured or produced and in return then can be offered to consumers. “In market economy, supply and demand will allocate in the most efficient way possible.” (Investopedia.com, 2012) In most cases the price of an item or service is based on the collation or reflection of supply and demand. Supply can be changed by numerous factors such as the cost of goods that go into making a product, an increase in the number of production companies, and even technology. Demand may vary based on factors such as consumers change in income, opinions of economy, unemployment rates. There are four basic guidelines of supply and demand. “Demand increasing, and supply remaining the same will lead to a higher equilibrium price. Demand decreasing and supply remaining the same will lead to a lower equilibrium price. Supply increase, demand unchanged will equal a lower equilibrium price. Supply decreasing and demand increasing will lead to a higher equilibrium price.” (Investopedia.com, 2012) “In a competitive market, the unit price for a particular item will vary until the price reaches a point where the demand equals the quantity. This is also known as economic equilibrium.” (Wikipedia, 2012). This winter economic equilibrium greatly worked in my favor. For quite some time, I had wanted to purchase a new car. However I was not able to find a new car in my price range. In January of 2012, new car sales were at an all-time low. Supply of cars was way up and not enough consumers or buyers for the cars. I was not only able to purchase a new car, but the car I most wanted, a new Dodge Challenger. Two factors that allowed me to be able to afford the car were supply and demand. Both played a major part in me being able to purchase the car. Due to the economy not being in the greatest shape, car sales were way down. In return the dealership was over stocked with the cars. In addition, because not many people were purchasing new cars, the dealership was also more than willing to negotiate a price with me that I could afford. There were several substitutes or alternatives I could have chosen instead of the Challenger. For example, I could have gone with a new hybrid or more gas efficient car, but the Challenger was the car that I really wanted. Two compliments to my purchase were free oil changes for 5 years and 3 years of free service checks. These options were not presented to me when I look at other cars. Price elasticity demands that the quantity of goods and services changes the price. Price elasticity most certainly played a part in the purchase of my Challenger. The Challenger was definitely not a necessity. Because of that factor there was much room for price elasticity. If the new car had been a necessity, there would not have been as much room for negotiation of price and in the end, I would not have been able to afford the car.