Factors That Will Be Affecting The Demand and Supply of A Given Number of Products

INTRODUCTION
In Economics, the market relations between prospective sellers and buyers of a good are
known as Demand and Supply. The price and quantity sold in a market is determined by
the Demand and Supply model. The phrase “supply and demand” was first used by James
Denham-Steuart in his book named Inquiry in to the Political Economy which was
published in 1767. Since the 19th century the theory has been unchanged. There is always
a change in Demand and Supply of a particular product in a market due to various
reasons. There are very few products whose demand or supply doesn’t change with
respect to price. These are known as inelastic products. A very good example of perfectly
inelastic product is Penicillin. There are elastic products too whose demand changes with
respect to price and people don’t hesitate to opt for a cheaper alternative. Tea and coffee
are the best example of an elastic product.
This concerned report will explain the factors that will be affecting the Demand and
Supply of a given number of products. The report has been prepared through in-depth
analysis of the market. The yearly price and sales of various products are examined and
collected to obtain this report. After description of the factors affecting Demand and
Supply of each product a graph is provided to understand the future market well. Future
prediction of each product is given. Different websites and books were of great help
which were acquired from our college library and the library of university of east
London. The guidance of our lecturer Ms. Ellie Semsar was very supportive in
completion of the said topic in a report format with proper referencing followed by a
bibliography
I. The law of demand states that quantity demanded moves in the opposite direction of
price, and this effect is observed in the downward slope of demand curve. The demand of
certain products are analysed below and the factors affecting there demand are listed and
elaborated
A. CONVENIENCE FOOD.
The demand for various convenience foods will gradually increase in future. There are
various convenience foods available in the market today. Dry pasta is the leading
convenience food sold in the US market. In the year 2004 the quantity weight of dry
pasta sold was 2446932 pounds at the unit price of $0.36 and the total sales of dry pasta
was $1086142. In the following year the unit price remained the same as $0.36 but the
quantity of dry pasta sold was 2450666 ponds which produced total sales of $1127520.
The demand for dry pasta increased in 2005 and is expected to keep on increasing in the
following years. The sales of dry pasta reached $167883 in the year 2006 with a unit
price of $0.34 and the quantity of dry pasta sold was 2522206 ponds. The demand of
convenience food has kept on increasing due to various aggressive and innovation
policies acquired by various companies. There is increase in the brand value and new
ways of cooking pasta, such as in fry pans. The intensive advertisement on TV also
helped to increase the demand of convenience food. The main reason for the increase of
demand of convenience food is that, it takes much less time to cook and its easy to cook.
Manufacturers have tried to rid the meals of their unhealthy tag by offering a range of
low-fat, low-salt options to tap into the appetite for healthy eating. These various reasons
tend to increase the demand of convenience food in the future.
1. http://hotdocs.usitc.gov/docs/pubs/701_731/pub3947.pdf
B. PRODUCTS PURCHASED ON THE INTERNET.
The market for internet shopping is huge and will continue to grow rapidly. The demand
for internet shopping is high and will continue to increase in the next coming years. The
total online market in the year 2004 was estimated to be £6.3 billion. The demand
increased in the following year and the total online market was £ 8.2 billion and 10.9
billion in 2005 and 2006 respectively. It is estimated that the demand for the net online
market will keep on increasing and will reach the staggering amount of £14 billion and
£17 billion in 2007 and 2008 respectively. Various factors are responsible for the increase
in demand of online shopping. People find it convenient to shop online since it increases
their individual choice and they get more options which help them to find the lowest
prices. However there is threat of least awareness of online shoppers, but steps are being
taken for more secure environment in the net for the online shoppers. Various selling
regulations (‘DSRs’) are being imposed which gives a customer a right to know who they
are dealing with and the key information of what they are buying. The regulations also
include an unconditional right to cancel within seven days with a full refund and
protection against online payment card fraud. These all have created a better and secured
environment on the internet which is resulting in the rapid increase of demand of online
shopping.
2. http://www.oft.gov.uk/shared_oft/reports/consumer_protection/oft921.pdf
C. FAX MACHINES.
The demand of fax machine is decreasing after the evolution of paperless e-mail. The
demand for stand –alone fax machine significantly decreased over the last several years.
In the year 2002 Uni-Copy Technologies was able to sell 60 fax machines per year. The
demand has significantly decreased. This year the in 2007, till October only 7 stand-alone
fax machines are sold by Uni-Copy Technologies. Our culture’s demand has changed to
more electronic and paperless formats rather than hard copy which enables greater
control, more security and manageability of the documents are increased. The shift
towards malfunction units of companies of companies and the fall of fax machine
production has declined the demand of fax machines. Legal offices are also going
paperless due to various advantages of paperless documentation. Fax is costlier than e-
mail since it doesn’t have the additional cost of papers and less number of staff are
required to attend and reply to e-mails. Fax machine is still used in various parts since 25
per cent of the world have no access to the internet yet but have the access to the fax
machine. The demand of fax machine is decreasing and will continue to decrease in the
near future.
3. http://www.china3cgroup.com/C3C/market.html
D. FILM AND CAMERA.
The market foe digital camera is entering in to a maturity phrase, therefore the demand
for digital cameras will decrease slowly in the coming years. The shrinkage of the digital
camera market will start in the year 2011. There was a rise of 15 per cent in global
shipments of digital cameras in 2006. There is a strong demand for the advanced models
in emerging markets but the demand is expected to decrease 8 percent according to
Economists. IDC have estimated a negative growth of digital cameras in 2011 after a
complete saturation of all regions and markets. The DSLR market is controlled by
Japan’s canon and Nikon with over 80 percent of World’s DSLR market. Sony is a major
and leading player of digital market as well. The demand of the Worlds digital market
will decrease due to the saturation of market in all regions.
4. http://www.theage.com.au/news/articles/digital-camera-demand-set-to-
drop/2007/04/25/118685752797.html
E. VIDEO RENTED FROM RETAIL OUTLETS.
The demand of rented video from retail outlets is slowly decreasing. An intense study on
the market of Europe’s rented video reveal that, the average rental price of a DVD in the
year 2004 was € 3.26 and the total spending on DVD rental was € 2.1866 million. In the
subsequent year the average rental price of a DVD decreased from € 3.26 to € 3.21 while
the total spending on DVD rental increased to € 2.3353 million. In the year 2006 the
average DVD rental price increased € 0.01 to € 3.22 and the total spending on DVD
rental decreased to € 2.1504 million. The demand of rented video from retail outlets is
decreasing slowly and will continue to decrease in future. There are various factors
affecting the decrease in demand of rented videos. The main drawback of rental videos
from retail outlet is the invention of online multimedia. Internet really does offer an
unlimited choice. If there is something anyone wants to watch with a decent broadband
connection and some patience with a bit of technical knowledge it can be found on the
internet. Another main aspect of the decline in demand is the availability of free pirated
and latest videos and movies on the internet. However original videos are also available
with a decent cost. These factors are responsible for the decline in demand of rented
video from the outlets and will continue to decrease the demand in the future.
5. http://www.ivf-video.org/site/share/dlm/Files/European_Keydata_2007.pdf
F. PAY PER VIEW TV PROGRAMMING.
There are three services that provide pay per view satellite broadcasting in Japan.
WOWOW is one of the leading providers of pay per view TV programming which uses a
broadcasting satellite. The future of the pay per view broadcasting services is not so good
and is a bit harsh. In case of WOWOW the growth of satellite broadcasting service has
slowed down. The numbers of registered subscribers are decreasing in the past years. In
the year 2004 there were 1.86 million customers registered. The figure came down in the
following years. In 2005 the figure was 1.66 million and in 2006 the number of registered
customers kept decreasing to 1.46 million. The demand of pay per view customers is
expected to decrease in the next coming years to 1.26 million and 1.07 million in 2007
and 2008 respectively. The decreases of customers are due to various reasons. Major TV
operators are making focused effort on providing consumers digital multi-channel
services incorporating terrestrial digital broadcasting which is a new and appealing
feature. They are also providing triple play service which includes telephone, broadband
and broadcasting. The pay per view satellite broadcasters are unable to math the value
added services given by the major TV operators. The demand for the pay per view TV
programming is gradually decreasing.
6. http://www.nri.co.jp/english/opinion/papers/2006/pdf/np2006103.pdf
II. According to law of supply, the higher the price, the larger the quantity supplied
keeping all other things constant. The law of supply is demonstrated by the upward slope
of the supply curve. Factors affecting the supply of a certain goods are listed and
elaborated below.
G. CRUDE OIL.
Crude oil demand is increasing and will keep on increasing in the following years. The
total Global sale of crude oil in the financial year 2002/2003 was 475 million liters at a
price of $ 48 per barrel. In the following years the demand kept on increasing despite the
rise of price. In the financial year 2003/2004, a 541million liter of crude oil was sold at a
price of $ 48 per barrel and in 2004/2005 the sales increased to 579 liters at a price of $
70 per barrel. The demand kept on increasing in the following year, however there is a
limited supply of oil. In 2005/2006, 743 million liters of crude oil was sold at a price of $
88 per barrel.Global crude oil demand is expected to grow by about 1.3 million barrels
per day in 2008. Mostly high oil prices are a result of geopolitical factors and refining
problems rather than market fundamentals. Supply of oil is sufficient in recent times and
there is no need to increase the oil production. However the supply of crude oil will
gradually slow down in a long run since the resources are limited. In a short run the
supply is sufficient and there is no need to increase the production. Reflecting increasing
consumer demand for petroleum products, world crude oil demand has been growing at
an annualized compound rate slightly in excess of 2 percent in recent years. Another main
aspect of rise in demand is the non availability of cheap alternatives.
7. http://www.pir.sa.gov.au/__data/assets/pdf_file/0016/27205/oil_sales.pdf
8. http://www.eia.doe.gov/pub/oil_gas/petroleum/feature_articles/2004/worldoilsupp
ly/oilsupply04.html
H. COMPUTER MEMORY CHIPS.
Samsung is ranked first Worldwide as the leading supplier of DRAM in two consecutive
years of 2004 and 2005. DRAM is the most favorably used memory chip in both Laptops
and Desktops. In the year 2004 total revenue of the company worldwide was $ 8,119
million and the following year’s revenue was $ 8,020 million. The growth of the
company’s DRAM market rate was -1.2%. In the DRAM segment the shrinkage of
revenue was observed. However according to the Semiconductor Industry Association,
growth of the DRAM segment was expected in the following year by 9.1 %. The revenue
of DRAM is indirectly increased by the transition of DDR2. According to the forecast the
sales of DRAM is expected to be grow by 33 % in 2008. The supply of memory chips
will rise to meet the rise in demand in the following years. The main reason for the rise of
this market is the affordability of Computers and Laptops which has an annual growth
rate of 10 %. There is much more popularity of portable PC which has taken a toll on
desktops. Computers are the core of every business, which increases the overall demand
of the sales of computers and circuitously increases sales and supply of computer
memory chips. Wider acceptance of internet has also accelerated the sales of computers.
The supply of computer memory chips will indeed rise in the future.
9. http://www.samsung.com/us/business/semiconductor/news/downloads/MemoryBr
ochure0706.pdf
I. HOTEL ROOMS.
The demand and supply of hotel rooms in UK and London are studied, which concludes
that 2000 extra rooms will be required per annum over a period of 2007 to 2016. The key
reason of this huge demand of hotel rooms is the rise of international visitors. London is
the most visited city by international tourist with a percentage of 1.75% of the world’s
international arrivals visiting London. London’s profile has been developed and raised in
recent years with better marketing and promotion of London. The successful bid for the
2012 Olympic and Paralympics Games also adds to the popularity. Economist’s analyzed
that, 90 million international visitors spent one night in 2004, and the number of visitors
increased to 155 million in 2026 which is a 72% growth. The number of hotel rooms
available in 2004 is 98421 and in 2005 is 100122, the number rooms available in 2006 is
101232. This year the total number of rooms is expected to increase to 103875 and in
2008 the number of room available is expected to be 105876. The supply of hotel rooms
in less and is increasing slowly.
10. http://www.london.gov.uk/mayor/planning/docs/hotel-demand-study.pdf
J. FAST FOOD OUTLETS IN EMERGING MARKETS.
Saizeria co., Ltd. In located in Saitama, Japan is a chain of fast food restaurants. The
annual report of the company is examined and the demand and supply is analyzed. In the
year 2004, the number of restaurants were 666 and the total number of customers arrived
was 106525. The following year supply increased with the increase in demand. In 2005
the total number of customers was 106856 with an increase in the number of outlets to
713 and the increase continued to 730 outlets in 2006 with a total number of customers to
111561. The supply and demand are expected to increase in the following years due to
various reasons. The use of fresh vegetables and Italian food which is loved worldwide
increase the demand. Well balanced, serve well healthy meals at affordable price
increases the number of customers which they can enjoy every day and the increase in
number of stores regularly also attracts the customers. The supply will keep on rising in
the future with the rise in demand.
11. http://www.saizeriya.co.jp/ir_info/en/pdf_en/annual_report/annual_report2006.pd
f
K. CREDIT CARDS ISSUED BY FINANCIAL INSTITUTIONS.
The market of credit cards is growing. The growth of credit cards is 30 - 40 % in India.
Credit cards issued by ICICI bank was examined and found that, the total number of
cards issued was 13.1 million, 17.5 million in the financial year 2005 and 2006
respectively. The number of cards to be issued this year in 2007 is expected to be 22.6
million. There is a constant growth of demand and supply of credit cards in India.
Nowadays there is wider acceptance of cards by merchants and with more banks and
foreign, public sector units coming in this market is more aggressive than ever. Main
reason of rise in demand and supply are the innovative schemes and irresistible offers to
the cardholders and various partner merchants with co-branded cards with added benefits
on specific usage. However only 2% Indians carry cards till now, so the figures will rise
in the future. Nowadays more customers prefer to make payments through credit cards
rather than cash, moreover its easy to carry and safe to travel which makes it popular and
the acceptance level is high. The interest level is also very nominal for the facilities and
convenience provided by the credit cards. These factors will result in the rise of supply of
credit cards in future.
12. http://www.thehindubusinessline.com/2007/07/19/stories/2007071951010600.htm
L. LAPTOP COMPUTERS.
The affordability of laptops have made it popular day by day and it’s the main reason for
the rise in demand of laptops. To meet the high demands the supply has also increased.
The annual sales of laptops in India are taken in to consideration in this case and
conclusion is acquired. Laptop sales recorded a high growth of 97 %, with a rise of 41 %
in the business segment. Affordability increased the sales in households. In the financial
year 2004-05 total number of laptop sold was 177105 which increased in 2005-06 to
431834. This year in 2007 it is expected to reach a highest number of sales of 850860. On
an average the cost of an entry level Laptop now ranges between RS 31000 to RS 40000
compared to last year’s range between RS 58000 to 80000. Some laptops now also cost
around RS 10000 which is driving buyers to opt for Laptops. Government policies also
helps in increase of sales, for instance government now allows duty free import of
Laptops as baggage. Laptops have also amalgamated next generation technologies like
Wi-Fi, Bluetooth, and Infrared with mobile computing which brings added utility to
Laptops and attracts the youth as well. The demand of Laptops will increase in the future
due to the factors discussed above and the supply will also increase to meet the demand.
(2987 Words)
13. www.physorg.com/pdf10165.pdf
14. http://www.mait.com/newsletters/news197-e-
NL%20on%20Annual%20Review%202006-07.pdf?id=197
REFERENCES
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9. http://www.samsung.com/us/business/semiconductor/news/downloads/MemoryBr
ochure0706.pdf
11. http://www.saizeriya.co.jp/ir_info/en/pdf_en/annual_report/annual_report2006.pd
f
12. http://www.thehindubusinessline.com/2007/07/19/stories/2007071951010600.htm
BIBLIOGRAPHY
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htm

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INTRODUCTION

E. VIDEO RENTED FROM RETAIL OUTLETS.

F. PAY PER VIEW TV PROGRAMMING.

J. FAST FOOD OUTLETS IN EMERGING MARKETS.

K. CREDIT CARDS ISSUED BY FINANCIAL INSTITUTIONS.

1. Supply and Demand, Hubert D. Henderson

3. Principles, Problems, and Policies, By Campbell R. McConnell, Stanley L.

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