Non-Determinates Prices Of Supply Essay, Research Paper
Most people that are common shoppers have encountered a situation where the product that they were seeking to buy was not available. It is very easy to see that certain products do have an ample supply due to many reasons. Other than the price of that product, there are six major non-determinate factors of supply. These factors are: Number of Sellers, Technology, Resource Prices, Taxes and Subsides, Expectations of Producers, and Price of other goods the Firm could Produce. With these factors and the demand of the product, the supply of a product can be determined, and a price can be set.
The number of sellers can be one of the most determining factors of the supply of a product. The concept is very easy to understand. If there are more sellers, that is more stores and manufactures, there will be a larger amount of supply of a certain product. On the other hand, if there are a small number of sellers then there will be little supply of the product. When considering the price of a product, if there are more sellers then there will be more competition; therefore, the price will be at a low cost for the buyers. The sellers will not make a large profit. Moreover, when there is a small amount of sellers then the price can be higher for the buyers. This means the sellers will make a larger amount of profit. For example; there are more sellers for a Toyota Carmry, then there are for Dodge Vipers.
This world has experienced a huge technological advancement. Our knowledge in inventing new technologies has allowed us to become more efficient in the production of products. Also, we have been able to develop many new and better products for the buyers. Technology can do two things to the supply of a product. First, it can drive the price down due to more production of a certain product. With technology, production of a certain product has become cheaper and more efficient. The second thing that technology has done is decline the supply of certain product. With the production of new and better products, older products have become less used and not produced as much. A good example of how technology has effected this world is the invention and production of CD s. In today s world most Americans own a CD player and have gotten ride of the record player. Is very rare to see records for sale. Technology has caused the production of record to almost become instinct.
A factor that many people do not take into consideration is resource prices. Things that make up resource prices can include, but are not limited to natural resources, labor, capital, and entrepreneurship. If any of the resource prices increase, then the amount of supply would decrease. The idea works the other way also; if resource prices decrease, then the amount of the product would increase. Suppose that two companies are competing in the production of computer software. If one company has to hirer more skilled workers to produce a better product, their resource prices will increase. Therefor the amount of supply will decrease because sellers have to charge more than before to gain profit. If there were any reduction in resource prices, then the company would be able to produce more supply.
Taxes and Subsidies are very similar to Resource Prices. If there is more tax on certain products, then most companies will not produce large quantities of the product. So, if taxes increase for certain products, then the products will have a higher price and there will not be a large amount of them. On the other hand, certain subsides from the government would cause resource prices to be lower. This would cause a lower price and a larger amount of supply.
The last two remaining factors have to deal with the producers alone. Expectation of producers and prices of other goods the firm could produce deal with how the producers run their company. Expectation of producers has to deal with how the company is run and what buyers expect to see. For an example, when Iraq invaded Kuwait in 1990 the oil producers thought that oil prices would dramatically increase. Instead oil companies found alternatives to maintain the current price of oil. Let s say that the price of wheat was going to fall sharply. Farmers would do all they could to get rid of their inventory. With price of other goods the firm could produce the businesses are always considering to shift their current production from one product to another. They do this to keep the price of products down and gain more profit for supplying more products. An example would be when farmers switch crop due the cost increasing or decreasing. If farmers can gain more profit off one product than the other, then they will use more of their land for the product that produces more profit.
Producers and seller always consider how their product will be effected by non-determinate prices of supply. Each of the six factors affects how companies will produce and price its product. As buyers we have to pay what the sellers want, if there is a limited amount of the product. Or, we have the privilege to shop around and find the seller that has the product for a smaller price. Whenever you get frustrated that you cannot find the product you are looking for and it is highly price, remember that it is not always the seller who determines this price.