The demand and supply of goods and services correlate as they are the two strengths in the market that determine the prices within the economic framework. Economics greatly relies on the demand and supply of goods and services as it is a social discipline that handles their production, distribution, utilization, and management. Demand refers to the capacity of the goods and services the consumers require and their capability to obtain them (Dugah, 2011). According to Blanchard, supply refers to the amount of goods and services available in the market. Demand and supply refers to the capacity and accessibility of the goods and services and the potentiality of the consumers to acquire them. These two disciplines are influenced by various factors in the financial system that makes the prices to fluctuate in regards to the nature of the demand and supply of the goods and services. Some of the factors that affect the demand and supply of the goods and services include the streamlined and sociological preference of the consumers, commercial advertisements, essentiality of the consumers’ desires, scientific and technological advancements of the companies, seasonality and festive periods, natural calamities, populace growth rate, capacity of the business industry, income capability of the consumers, input costs of the companies and the governments’ financial and economic policies (2010).
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Raincoats Production by Manufacturing Company X
Company X is a manufacturing firm that produces raincoats. The main purpose of the company is to produce the goods that will be of service during the rainy and winter seasons. The prime factor for demand of the raincoats will entirely rely on the seasonality and weather conditions. Raincoats are utilized in the rainy and winter seasons and not in the sunny and summer spells. Thus their demand will be at the peak during the rainy and winter season due to the consumers’ urge to use them during these periods. Their demand will subside during the sunny and summer spells due their inability to serve their purpose during these times. The quantity of the raincoats demanded will generally fluctuate depending on the seasonality and weather conditions (Dugah 2011).
The supply of the raincoats will fluctuate according to various factors. One of these dynamics includes the availability of the raw materials to manufacture the raincoats. Another factor incorporates the manufacturing equipment and the taskforce required to produce the raincoats. Also, the accessibility of the raincoats to be vended in the market will determine their supply chain (Blanchard 2010).
The government is responsible for the taxation of goods and services in the economic framework of the nation. If the government increases the minimum wage of the raincoats, then their demand and supply will also be affected. This is because the prices of the raincoats will hike and thus the demand of the people may decline due to their limited affordability. In retrospect, the supply of the raincoats may increase due to the need of Manufacturing Company X to increase the raincoats costs to curb the additional wages incurred by the government’s policy. This will be so to maximize on the profits while on a new tax bracket (Dugah 2011).
According to Dugah, the advantages of price controls are that they are useful during skyrocketed impulsive prices such as in the food and agricultural sectors. The disadvantages of price controls are that they aggravate the economic system leading to scarcity or excessive supply. The government should only intervene in the market when the prices of goods and services have hiked and to be fair to both the manufacturers and the consumers as the two correlate. The government should not increase the minimum wages, rent controls, or unnecessary taxes as this will be both detrimental to the manufacturers and consumers. Instead the government should practice price controls on a balanced level to ensure proper equilibrium in the demands and supply of goods and services (2011).
Blanchard, D. (2010). Supply chain management best practices. Hoboken, New Jersey: Wiley Publishers.
Dugah, S. C. (2011). Understanding the principles of supply and demand. Web.
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