Monday, July 22, 2019
Trends in consumption patterns Essay Example for Free
Trends in consumption patterns Essay Although no single definition of economics will ever satisfy the demands of all analysts or even of all interested parties, attempts to succinctly define economics as a science, or even as a part of nature have persisted for centuries. A good, but certainly not exhaustive, definition of economics is that it comprises the study of how human beings allocate scarce resources to produce various commodities and how those commodities are distributed for consumption among the people in society with the added provision that the essence of economics lies in the fact that resources are scarce, or at least limited, and that not all human needs and desires can be met. (Economics, 2004)            This latter observation forms a central part of all economic theories and in some cases can be regarded as the central premise for the study of economics altogether. The fact of scarce resources has its counterpart in the availability (or unavailability) of currencies, and also in the desirability of specific resources among specific consumers. The general terminology associated with such considerations is known as the law of supply and demand. From this central idea springs most of what has comprised and still comprises economic theory and practice.            The law of supply and demand is at once simple to comprehend and perilously difficult to thoroughly understand. In its simplest sense, the law of supply and demand refers to the reality that resources, goods, or commodities which are in high-demand and short supply will command higher prices than resources, goods, or commodities which are abundant but in low demand by consumers. A readily comprehensible case-in-point would be the example of a rare book, or first edition publication. Such an antiquity may be of value, but its pricing and market value will depend utterly upon demand and availability (supply): The law of supply and demand will determine the value of a first edition, in other words, by how many collectors are interested in obtaining a copy, compared with the number of copies available. Even if a book is in scarce supply, it will have little value if it is not wanted by collectors and equally, a book which has a print run of several thousand copies can still be worth a great deal if there are more collectors requiring a copy than there are copies available. (Law of Supply and, 2005, p. 13)            Such simple models grant an elementary understanding of the law of supply and demand; however, the true implications of the seemingly simple paradigm are many and the nuances of what influences trends in supply and demand is much more difficult to predict and quantify than the basic attributes of the theory itself. In some ways, entire markets are basically an extension of the law of supply and demand; a concrete representation of it in action, what is called a market is simply a label for an intersection of supply and demand correspondences, from which equilibrium allocations may be deduced but whether or not equilibrium allocations may be determined by scientific study remains ambiguous given the very real influence of psychological factors which impact demand among consumers and are perilously difficult to gauge or predict. (Loasby, 1999, p. 107)            On the supply side of the equation, it is possible to pinpoint certain trends and tendencies which lead to imbalance. The law of supply indicates that production should not exceed demand, nonetheless, Economic imbalance caused by overproduction or shortages is a recurring leading cause of business cycle downturns and despite the fact that under most economic theories, this situation should not occurthe pricing system is supposed to create an environment in which supply and demand always match at the market price the ambiguity of consumer demand proves much more difficult to anticipate to gauge with precision. (Schaefer, 1995, p. 17)            One reason for this difficulty on the supply side is that fact that When the economy is at full capacity, certain industries become carried away with the prospects of unlimited growth as they expand production capacity to meet rising demand which,in turn, often leads to overcapacity. Because most business operations tend always to experience fluctuating sales and cost pressures, they concentrate on immediate business problems-not realizing the severity of the overcapacity. (Schaefer, 1995, p. 17)            The same principle holds true for currency itself: when overcpacity is reached in forms of currency, inflation is the result: an increase in the amount of circulating currency beyond the needs of trade; an oversupply of currency is created, and, in accordance with the law of supply and demand, the value of money decreases. Deflation is brought about by the opposite condition and yet despite the working, theoretical paradigm, a balance in supply and demand is usually fleeting. Modern economics admits a new form inflation: government borrowing, the increase in the money supply, and a diminished supply of consumer goods which can increase demand relative to supply and force rising prices. (Inflation, 2004)            On the demand side, ambiguities and uncertainties flourish. The law of demand dictates that demand for a product or good or commodity plus its relative availability will create the price. However, since consumer demand is a fickle and unpredictable force shaped by myriad factors, it is often difficult to spot or predict trends which will yield a good balance between supply and demand.            An example of just how subject to vagaries and random events is the notion of consumer demand, is the notion of the umbrella company looking to sell umbrellas Contingencies open up a very wide field. Rain on May 15, 2006 certainly matters, but so does rain on May 14, since this is likely to bring forward some purchases, and therefore to affect both supply and demand on May 15 which is hardly a mathematical paradigm susceptible to logical scrutiny, much less production quotas. (Loasby, 1999, p. 110)            It becomes incumbent upon the observer to regard the demand side of the supply and demand paradigm as somewhat beholden to psychological vagaries the laws of value and exchange as dependent on the (psychological) law of diminishing returns of satisfaction as the presumed basis of the entire theoretical study of consumption. In this sense, the universal catallactic law of supply and demand involves a (psychological) linkage with the realm of consumption (Zafirovski, 2003, p. 19).            As such it is often useful to regard consumer trends as psychologically driven and to avoid using the market specification as a framework for investigating demand, and instead considering the variety of intentions among potential purchasers in order to specify the market correctly. (Loasby, 1999, p. 110) Another factor which contributes to consumer demand is personal disposable income and this aspect of economics is influenced by many things: The amount of personal disposable income that consumers have available to spend in retail outlets is influenced by a number of general economic factors including: †¢ unemployment levels; †¢ regional employment patterns; †¢ interest rate levels; †¢ inflation levels; †¢ earnings levels. (Varley Gillooley, 2001, p. 61) With such a wide range of considerations, it is no surprise that the intricacies of supply and demand have not bee reduced to formulaic consistency de spite centuries of analysis.                                                           References Inflation. (2004). In The Columbia Encyclopedia (6th ed.). New York: Columbia University     Press. Law of Supply and Demand Determines Value of First Editions. (2005, January 8). Western     Mail (Cardiff, Wales), p. 13. Poindexter, J. T. (1993). Labor and Economic Trends: Effect on U.S. Workforce. Review of     Business, 15(1), 34+. Schaefer, H. G. (1995). International Economic Trend Analysis. Westport, CT: Quorum Books. Varley, R., Gillooley, D. (2001). Retail Product Management: Buying and Merchandising.    London: Routledge. Zafirovski, M. (2003). Market and Society: Two Theoretical Frameworks. Westport, CT:          Praeger.
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