Fundamentals of Economics Essay Example | Topics and Well Written Essays - 1500 words

Fundamentals of Economics - Essay Example Aside from prices, there are a host of factors that may either push for an upward or downward effect on the volume of demand or supply exerted towards the market. Among the determinants for demand include taste and preference of consumers, income level of consumers, availability of substitute products, and population. For supply, the determinants include, but are not limited to, production cost, taxes and subsidies, number of producers or suppliers, available technology, and prices of substitutes. Applying some principles in marketing, demand can further be described or categorized as latent demand, and effective demand. While consumers may want to have a number of units of a particular commodity constituting the latent demand for that commodity, only consumers who have the capacity to pay for that commodity at a price level producers are willing to supply will constitute the effective demand. Elasticity, on the other hand, can be simply defined as the degree of change on the volume of demand or supply of a particular product in relation to changes in the behavior of its determinants. For example, a product that has an elastic demand is a product whose volume or quantity being demanded in the market has increased tremendously due to a lower tag price offer in the market. At the same time, such product with elastic demand would have a tremendous decrease in volume of quantity demanded should its price suddenly becomes a bit more than what it previously offered to the market. In other words, elasticity can be described or defined as the degree of changes in the volume of quantity demanded or supplied given the degree of changes in its determinants. Elasticity determined by changes in prices has been referred to as price elasticity, as shown in the example that has been mentioned above. Demand or supply behavior that