In General, demand, supply and price are the major components of the economy in both competitive and non-competitive markets. Exchanging goods is occurring everyday and everywhere in the world so in order to maximise profit and the use of resources, companies have to know approximately the quantity of goods that customers require. This short essay will discuss the market mechanism in general and particular in food market in the United Kingdom.
What are demand and supply? Firstly, we should briefly understand some basic concepts and the relationships between them in the economic environment. Demand is about the amount of goods that satisfy human wants while supply is to provide products that are wanted or needed. In addition, pricing has a big influence on them. The profit of the firms depends on it. When the price goes up, the quantity demanded will decrease and vice versa. It means demand and price have an inverse relationship. On the other hand, the quantity supplied will increase when the price rises so they change in the same direction.
According to the table below:
We can see that the quantity purchased of pork sausage went down by 3% as the result of the price of it was increased by 4% in four weeks to 21 March 2010. In addition, when the price of Pork Chilled Ready Meals dramatically decreased by 33% so the consumption was a significant rise by 24%. However, the quantity purchased still went up even there were accumulations in price. There are some evidences that prove meat is providing more energy and nutrient than vegetable so requirement of it for their daily meals cannot cut down. For instant, a 3-ounce serving of lean sirloin steak has 180 calories, while a 3-ounce serving of green-leaf lettuce has only 13 calories and calories in meat come from protein and fat while vegetable does not have. So the table above has shown the demand of pork belly rose by 4% although there was an ascending in the price. Moreover, some people think eating meat too much is not good for their health so no matter what the price is; they reduce their consumption. In reality, the law of demand and supply may not be true in some cases.
Following by are some determinants that affect demand other than price. Will Roger has said: “Advertising is the art of convincing people to spend money they don't have for something they don't need.” In fact, it is true that advertising has a great influence on consumers’ tastes. The more attractive and convinced the advert is the greater chance people will try to buy the product. The change of demand is also the result of the number and price of substitution and complementary goods. Especially in food market, there are many types of substitution and complementary goods. For instant, if price of cauliflower rises people will buy broccoli instead of cauliflowers and pie-custard are always come together if custard becomes more expensive then the quantity demanded of both will go down. Furthermore, income and...