Principles of Economics and How They Played Out in the Real Market Situation

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Impact of fluctuation The soaring prices of basic items in the making of fried Tofu and the demand for the same has made it difficult to trade in this particular item as there have been price consequences on this delicacy for many of the Indonesians. The last few years have seen soaring prices of chili and soya beans. This has been in line with the rest of the world food prices that have seen some countries like Egypt and Tunisia break into violent riots and government overthrow. This case study indicates portrays a significant amount of economics principles and how they interplay in the real market situation. The following are the major economics principles that were noted in the case study; Cross-price elasticity (include substitutes and complements) Cross-price elasticity is the percentage change in the quantity demand of one product occasioned by a given percentage change in the price of a related product. With the variation in the prices, the demand of a particular item does not solely rely on its price but that of other products as well that may be a substitute or a complement to it. Cross-price elasticity is used to classify and group items that may compete against each other. For instance if the increase in the price of item X results in the increase of demand for item Y with the price of Y remaining constant, then the items or products X and Y are said to be substitutes. On the other hand if the price of item A results into the drop in the quantity
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