Changes in Supply and Demand

Changesin Supply and Demand

Achange in supply refers to a situation where the output or productionof a commodity or service becomes altered such that it increases ordecreases, making the supply curve to either shift to the left or theright. The following is an example of a change in supply indicating adecrease, as well as an increase in demand.

Considerthe production of coffee, where the original equilibrium price is $6per pound, and the corresponding equilibrium quantity is 25 millionpounds per month. Different factors can result in an increase indemand, and they include a higher price for the coffee substitute, anincrease in population, an increase in the future coffee prices, anda lower price for a lower complement of coffee (Rittenberg &ampTregarthen, n.d). Alternatively, a decrease in demand for coffee canbe achieved emanating from a change in preferences where peopleconsume less coffee, an increase in the price of coffee complements,a decline in the price of a substitute, a decrease in population, andlower price expectations in the future.

Onthe other hand, the supply of coffee may increase due to a reductionin the price of inputs such as labor, an enhancement in thetechnology of coffee production, favorable weather, as well as a risein the number of coffee-producing organizations. Furthermore, thesupply of coffee may decrease due to various factors, which includean increase in the price of production inputs utilized in theproduction of coffee, a reduction in production because of coffeeproduction technology, an augment in the returns available from otheruses, a decline in the number of coffee-producing organizations, or anatural event like the presence of excessive rain (Rittenberg &ampTregarthen, n.d).

References

Rittenberg,L. &amp Tregarthen (n.d). T. Principlesof Microeconomics.Retrieved fromhttp://catalog.flatworldknowledge.com/bookhub/21?e=rittenberg-ch03_s04