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Which would you expect to fluctuate more over time: the price of coffee or the price of eggs? Why?
Member rating: No Rating | Words: | Submitted: Wed Nov 01 2006
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Which would you expect to fluctuate more over time: the price of coffee or the price of eggs? Why? The prices of products in the real world alter continuously in response to the prevailing market conditions. Economic theory helps to explain these changes by showing how the theoretical price of any product is dependent upon two key drivers: the level of demand and the level of supply. It is argued that the price of a product will rise if the demand for it increases, whilst all other variables (such as the demand for competing or substitute products remain the same). The resultant price rise will encourage suppliers to increase the supply of the product, provided they have the flexibility to increase it quickly, easily and economically. Conversely, other things being constant, if the demand for a product falls, its price will fall and suppliers will tend to reduce the supply of...
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