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This 4 page paper explains and discusses the Law of Supply and Demand, choice, decisions, elasticity and inelasticity and provides examples. Bibliography lists 5 sources.
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4 pages (~225 words per page)
File: MM12_PGspldm06.rtf
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NetMBA, 2006). If there is a balance between the supply, i.e., the availability of the product, and the demand, i.e., how much of the product consumers want, the price for
the product would be considered correct or appropriate. If there is an imbalance, the price will change. When a product is in short supply and there is significant demand
for the product, the price will increase (Wikipedia, 2006). When the quantity of the product is greater than the demand, the price will decrease (Wikipedia, 2006). This assumes a
competitive marketplace (Wikipedia, 2006). This process of price variability based on the supply of a good and the demand for it will continue until a balance is once again reached
(Wikipedia, 2006). At that point, an equilibrium is said to be established between the supply and the demand (Wikipedia, 2006). Kirzner (2000) commented: "The theory of supply and demand is
recognized almost universally as the first step toward understanding how market prices are determined." Furthermore, this theory also explains how the price of a product shapes production and consumption decisions
(Kirzner, 2000). These business decisions are the foundation for the economic system (Kirzner, 2000). Scarcity means there is less of something than is demanded or wanted (Investopedia Inc., 2005).
What is scarce doesnt matter; it could be money, goods, time, happiness, skills or anything else (Investopedia Inc., 2005; Wikipedia, 2005). For a nation, for example, scarcity may refer to
natural resources, technology, labor, etc. (Investopedia Inc., 2005). Resources are always limited in one way or another, therefore, individuals, companies and even nations must make decisions based on what they
perceive is scarce (Investopedia Inc., 2005). Choice refers to the decisions business, consumers or others make. Choice may involve a trade-off, for example, a worker needs more money, which he
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