Fifty years ago when I was a student of B.Sc(Ag),
the then Professor of Economics taught us the law of supply and demand giving
examples of agricultural products. Later on, I could see it in real life, how
supply and demand operates not only in marketing of goods but also in every
walk of life. In Tamil Nadu, (why in Tamil Nadu alone? Almost in every State)
there is a severe power shortage while demand of power for various purposes –
domestic, industrial, agricultural, business etc. is growing but we all know
for sure the supply is limited because of constraints in production. If there
is no production, supply gets limited and hence one has to limit one’s demand.
One of the methods of limiting demand is to save power without wastage. In
order to make the people to use less power, the cost of the power can be
increased. When the cost escalates people have an inclination to use less power
in both domestic and commercial sectors.
The
power shortage has increased the demand for gadgets like UPS, inverters and
generators and the supply of these gadgets has also increased. Therefore when
the supply of power is limited, demands for an alternative increases and thus
creates good marketing for UPS, inverters and generators.
The
supply and demand determine the prices of products. If desire for goods
increases while its availability deceases, their prices rise. On the other
hand, if availability of the commodity increases and the desire for it
decreases, the price comes down. This fantastic economic theory is used as the
fundamental rule for marketing all over the world.
Production
costs limit the supply or increase the price of goods – may be electronic
goods, vehicles, tooth paste, soap, clothes etc. etc. Supply is also determined
by the technology used in the production. New advanced technology also
determines the supply. Sometimes supply is withheld for creating a scarcity in
the market to get increased price for the commodities. Above all, the number of
suppliers of a particular product counts a lot. Limited numbers control the
market price while larger numbers create competition in supplying; such
competition helps the consumers to go for better products with cheaper cost.
Similarly
one of the major determinants of demand is the income of the consumers. The
demands get increased when people have more money in their pockets. Taste and
preference also determine the demand. Sometimes consumers expect that the cost
of a particular item may go up in future, so they decide to buy it as early as
possible. Also if the number of potential consumers is large the demand gets
increased. I find it so fascinating to think of our day to day life linked with
supply and demand theory of Economics. Actually the phrase “supply and demand”
was first used by James Denham-Steuart. Then later on, many other economists
applied this in their own studies.
Hence,
supply and demand, indeed govern our life. One has to plan his or her life
according to this simple economic theory. But who cares about it when one has
plenty of money! Somehow supply and demand are ignored or managed. In fact,
life itself is a management and everyone is good at it.
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