Demand and Supply
Bread is a product that I use on a daily basis. Various factors will motivate buyers to consume it. The demand for bread varies with regions, and some factors contribute to increased consumption or reduced consumption of bread. The supplier also has factors that affect the number of bread supplied. The factors that affect demand for bread include taste and preference of consumer, the income of the consumer, price of complimentary goods, price of substitutes, the size of the market and the expectations of the price of a product in the future.
Taste and preference affect the demand for bread. When a consumer has a greater taste and preference for bread, there will be an increased demand which will increase the purchases for the bread. In case the consumer’s changes taste to a substitute products like Rye Bread or Corn Tortillas, the demand for bread will go down. The income of consumers also affects the demand for bread. When the income is low, the consumers opt for complimentary goods which lower the demand for bread. Great income increases the purchasing power of the consumers which raise demand for bread.
Price of substitute goods of bread like the sweet potatoes and vegetables affect demand for bread. When the price of substitute products is high, the demand for bread rise and when the price of complimentary products is low, the demand for bread reduces. The price of complimentary products affects the demand of bread because if the price of complementary products like peanut butter or jelly is raised, the consumers will not have increased demand for bread especially if they are used to using it eat bread with the products.
The size of the market will also affect the demand for bread. When the population is large, the demand for bread can increase to satisfy the needs of all individuals within the population. A small market will lead to reduced demand for bread. The expectations of the price of bread in future will determine the demand for bread. If the price of bread is expected to rise, consumers can buy in bulk to cater for the times the price will be increased.
The supply of bread is affected by several factors which include the number of producers, cost of production, related supply good, technological improvement, tax, government subsidies, cost of raw material and weather. Where there are many producers of bread, the supply will be increased as all the producers will have to get a customer. Fewer producers of bread mean there will be reduced supply of bread in the market. This is because the demand will be higher than the bread available for supply.
The increased cost of production can lead to reduced number of bread produced which will, in turn, decrease the supply of bread. Increase in related goods supply will lead to a decreased supply of bread. This is because there will be reduced demand for bread in the market. Lowered taxes will also increase supply as the price of raw materials will be reduced which will translate to increased production. Technological improvements will lead to increased supply since technology enhances production which means more bread will be processed. Government subsidies affect supply where there are increased subsidies. This is because increase reduces the cost of goods which will increase consumption of bread hence more supply.
Weather is a factor they affect supply. When the weather is conducive, supply goes up unlike when the weather is not good. This is because more consumers will access the bread from the retailers. The suppliers also will have a better way to distribute their products to consumers which will increase the supply of bread. Cost of raw materials will affect the supplied bread. This is because when the cost is low, manufacturers will produce more bread which will increase the supply of bread unlike when the cost of raw material is high.
Changes in demand and supply affect equilibrium which is the point when the price of products or service remains the same. When the demand for bread is high, the equilibrium price rises since the demand curve shifts to the right. This is because more people will be consuming bread and increasing the cost of bread will not limit their consumption. Reduced demand leads to reduced equilibrium price where the demand curve shifts to the left. When the supply of bread is high, the equilibrium price is lowered so that consumers can afford the bread to increase consumption and minimize waste of bread in the market. For instance, when we have 200,000 loaves of bread, each will be sold $5 unlike when the quantity of bread in the market wills 10,000 where they can be sold at $20 per loaf which will be the equilibrium price at that moment. This is an indication that demand and supply affect equilibrium price of any product when the curve shifts.
I anticipate changes in demand and supply of bread in the near future. This is because of increased substitutes and changes in consumer taste and preferences. With the new generation, the mode of diet is changing, and many emergent substitutes will change the demand for bread in the near future. Improved technology will lead to emergent of more products that will replace bread which will affect demand and supply of bread.