Yap Ying Jie0802457B

Topic: Demand and SupplyArticle: Makeshift mart sells cheaper good staples Source/Date: The Straits Times, 16 June 2008

Analysis

The article reported that price of food staples in the makeshift marts in Jurong West have dropped to allow residents to enjoy privileges for their good support over the past 20 years.

This article is related to the concepts of demand and supply. Demand refers to the quantity that consumers are willing and able to buy at different prices, ceteris paribus. Supply refers to the quantity the sellers are willing and able to make available for sale at different prices, ceteris paribus. The equilibrium is where quantity demanded is equal to quantity supplied.

As there is a decrease in the price of food staples, it led to an increase in quantity demanded for the amount of food.

The diagram above represents the demand and supply for food staples. The decrease in the price is reflected by a movement to the right along the demand curve from A to B. When the price decreases from P1 to P2, the quantity increases from Q1 to Q2.

It seems that there will still be a frequent sales offer for food staples if the residents’ response is positive. This helps in improving the seller’s sales profit as they are able to sell much more at lower prices. Thus at the end of the day, it will be beneficial to both the customers and the sellers.

Yap Ying Jie0802457B

Topic: ElasticityArticle: US consumer prices up 0.6% as petrol soars Source/Date: The Straits Times, 14 June 2008

Analysis

The article reported that the soaring petrol prices had caused consumer prices to increase by the fastest rate in 6months.

This article is related to the concepts of price elasticity of demand. It is the measure of the responsiveness of the quantity demanded of a good to change in its prices, all other factors being held constant. Price inelastic is where the percentage change in quantity demanded is less than the percentage change in price.

The diagram above shows that the demand of petrol is price inelastic. As the price of petrol decrease by 10%, the increase in quantity demanded is less than 10%. Thus when the price of petrol increases, the quantity demanded will not decrease as much because of its needed supply for vehicles. Many people who own vehicles will still have to buy petrol despite the increase in price. This in turn causes consumer prices to increase because of the interest rates of transportation fees.

It seems like petrol prices will continue to increase with the price hikes from the producers of petrol in certain countries. This will not be beneficial to the world economy as it affects everyone directly or indirectly in terms of pricing issues. Therefore, I believe that something needs to be done to stop the petrol prices from increasing.