Economic Essay Example | Topics and Well Written Essays - 1500 words

Economic - Essay Example Price is deterrent to consumers’ consumption spending but serves as a motivation for the producers and sellers at the same time. However, their behaviors tend to vary on the responsiveness to price changes or elasticity of the goods and services in question and can be influenced by several factors present in the economy. In the end, rationality will be the guiding principle for both the consumers and the producers in making economic decisions. This paper tries to examine the factors related to changes in price of beef and the behaviors of both consumers and suppliers of beef towards it. In analyzing price elasticity of the demand and supply of beef, discussions on market price, determinants of price elasticity of demand and supply were also made. Related articles on demand and supply of food and grains like corn are utilized to achieve the goal of producing an intelligent analysis of the issues reflected in the article. And for better understanding of some of these economic co ncepts, illustrated graphs were also used to help in serving the purpose. 3. Analysis A. Market Price One of the economic goals that are widely, if not accepted in our society and in many others is the price level stability (McConnell and Brue 1993). This goal aims to avoid the sizable upswings or downswings in the general price level. In a microeconomic perspective, this goal is reached when changes in the market prices are manageable and don’t hurt consumers and producers that much. As price is the quantity of money paid by the buyers or consumers and received by the sellers or producers for a unit of good or service, it is very important for it to be stable.We need to analyze market prices to extend our understanding of demand and supply and to see the relative efficiency of these in allocating resources. A rise or fall in market prices will have a corresponding effect or impact to the people in the economy. In the article, the rise in beef price inflicted by high corn pri ces, more exports to protein-hungry nations and the market forces of supply and demand, is causing a pain being felt by beef lovers nationwide. But since some customers like Beth Belling from Omaha are carnivore, they have to have their beef even if hurts them a little more. Retailers are also affected by the increasing beef price but they reported that they are absorbing some of the cost increases— as much as $1 a pound for many cuts of beef — to keep consumers buying. Ruth Comer, a spokeswoman for West Des Moines-based Hy-Vee Supermarkets, said that they try to flatten out the price curve as much as they can so the customers don’t experience sticker shock when they come in store. They also believe that passing price increases along is going to prompt customers to pull back and stop buying or look elsewhere. Restaurant operators also say that higher prices of beef squeeze their finances as they become reluctant to raise menu prices. B. Price Elasticity of Deman d and Supply The responsiveness of supply and demand to any change in price is measured by the price elasticity. It is expressed as the ratio of the percentage change in the quantity demanded and supplied to the percentage change in price. This value will help us determine the degree of elasticity that a product’s demand or supply can have. The degree of elasticity, classified as elastic, inelastic, or unit elastic, will tell us the nature of the product (McConnell and Brue 1993). 1. Price Elasticity