Introduction
In the current world, one can go and buy a product double the price that they both the previous day and wonder what are the causes the huge price increase. Such market dynamics can be properly explained by demand and supply concepts. Demand and supply are key components in economics and are considered the most powerful among all tools in economics. Demand typically indicates the quantity that consumers of a given product or service are willing and capable of buying in a particular time period with a particular price (McEachern, 2018) Similarly, supply’s definition corresponds to demand’s definition but supply deals with producers. This paper outlines the basics of demand and supply and apply the basic to an industry that has shifts in demand and supply curves.
Part 1
Movement along demand and supply curves is normally distinct from the shift in the curves. A movement along the demand curve normally occur when the price of a commodity changes but all the other factors that affect demand remain constant (McEachern, 2018). Other factors that affect demand include, taste and preferences, consumer income, price of other goods, and customer expectations about the good. This movement typically changes the quantity demanded by the customers. Similarly, a movement in supply curve occurs when there is a change in the price of a commodity and all other factors are constant. In supply, there is normally an upward movement when the price of a commodity rises and a downward movement when the price falls. The key factor that causes the movement in the two curves is price. For example, when the price of a phone increases, there will a downward movement in the supply and demand curve of the phone.
On the other hand, a shift in the demand curve is where there is a movement in the curve due to a change in other factors that affect demand but not the price. Similarly, the shift in supply curve also occurs when other factors that affect supply, other than price, causes the movement in the curve (Dean et al., 2020). The main difference between the movement along the curves and the shift of the curves is that in movement, the price changes effects the movement along the curve while in shift, other factors other than the price effects the movement along the curves (McEachern, 2018). Factors that can cause a shift in supply curve include, expectations of the producer, prices of the available resources, and price of other commodities. For instance, when the price of gas increases, the supply curve of vegetables may shift to the left.
Subsequently, the concept of equilibrium associated with demand and supply occurs when demanders and suppliers’ plans exactly align (McEachern, 2018). The price and quantity of a product usually remain stable when the market reaches equilibrium (KLEIN, 2010). However, the equilibrium price and quantity changes when there is a change in other factors that affect demand or supply of a product. A shift in the supply and demand curves has a direct impact to the equilibrium. The shift affects equilibrium since a supply increase leads to a lower equilibrium price while a decrease results in a higher equilibrium quantity (Dean et al., 2020).
Part 2
The manufacturing industry is one of the biggest industries in the US. Apple company belongs in the manufacturing industry that develops mobile phones known as IPhone that are supplied worldwide. Currently, the demand for iPhones is relatively low compared to the previous year which has caused a lower supply of the phones. Data from Bloomberg indicated that iPhone shipments to a country like China have dropped by 30%. One of the major factors that has caused the shift in the supply curve is increase in production of iPhone (Mullaney, 2023). There has been an increase in the chips prices for iPhone which has caused the production cost to be high and thus the supply has reduced.
One factor that has caused the demand for iPhone to decrease is consumer tastes. In china most of the consumers have continued to prefer Huawei smartphones which have more extra features than the IPhone (Mickle, 2023). Additionally, the consumer income has also caused the demand curve to shift since most customers are unable to afford the latest versions of iPhone which are relatively expensive since their income has significantly reduced due to tough economic times. A decrease in income normally reduces demand of a commodity (Wu, 2023).
Conclusion
Demand, supply and equilibrium are key economic concepts that play vital roles in comprehending market dynamics. The major difference that distinguishes movement along the supply and demand curves and the shift in the curve is that the price influences movement in the curves while other factors influences the shift in the two curves. Equilibrium normally takes place when there is an alignment in the plans of consumers and suppliers. iPhone, has recorded low supply and demand recently due to factors like increase in the production cost and decrease in consumer income.
References
Mickle, T. (2023) ‘Apple’s Sales Drop Slightly While Profit Is Up 11 Percent’, The Newyork Times [Preprint]. doi:https://www.nytimes.com/2023/11/02/technology/apple-earnings.html.
Mullaney, T. (2023) ‘How manufacturing chips in the US could make smartphones more expensive’, CNBC.
McEachern, W. A. (2018). ECON MACRO (6th ed.). Cengage Learning US. https://online.vitalsource.com/books/9781337671804
Wu, Q. (2023) ‘Research on the factors that affect demand and the effects of changes in demand on prices’, Advances in Economics, Management and Political Sciences, 18(1), pp. 391–395. doi:10.54254/2754-1169/18/20230104.
KLEIN, K. C. (2010). Supply, Demand, and Equilibrium. 21stCentury, 69.
Dean, E., Elardo, J., Green, M., Wilson, B., & Berger, S. (2020). Demand, Supply, and Equilibrium in Markets for Goods and Services. Principles of Economics: Scarcity and Social Provisioning (2nd Ed.).
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