Supply and Demand

1131 WordsMar 15, 20135 Pages
Essay 1—ECONOMICS I The fluctuations of the sales of products and services in our economy can be traced to the basic laws of supply and demand that govern our society today. The prestigious economist Adam Smith once proposed that society was governed by an “invisible hand” which worked to self-regulate the marketplace in the midst of the ambitious goals of sellers and consumers alike. It is by this “invisible hand” that our economy today works, and it can be used to make sense of how the laws of supply and demand work together to guide markets such as that of ice cream. The law of supply states that a rise in the price of a good induces an increase in the quantity supplied, while the law of demand states that a rise in the price of a…show more content…
Thus, the price of ice cream would increase while the demand for it would stay the same. Ice-Campusades would be forced to sell its ice cream at a higher price, which would cause consumers to buy it less frequently because of the high cost. If the weather on South American coco farms significantly improved and the price of coco crops decreased, then the result in the ice cream market would be a greater demand for the product because of lower prices. Ultimately, the sudden decrease of the supplies used to make ice cream can cause noteworthy fluctuations in ice cream sales at the ice cream stand on campus. If the school allowed another student the right to sell ice cream on campus in addition to the stand known as Ice-Campusades, the price of ice cream would likely fall as a result. In terms of the supply and demand graphs, the supply of ice cream would increase and therefore cause a shift to the right. Meanwhile, the demand for ice cream would remain unchanged because the number of students attending the school stays the same. The previous equilibrium price was $1.50, however, the new equilibrium price would be lower because the intersection of the supply and demand curves would be further down along the demand curve. This phenomenon makes sense logically as well because if one seller reduced his selling price, the other seller would have to

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