Economics is the difference and manipulation of supply and demand. There are scarce resources in which businesses manipulate to allocate to society. In society, it is assumed that the limited resources will not meet the needs of the entire population. The distribution of goods to society in a equitable way is the major goal of the economist.
Supply and Demand
Supply and demand is considered the backbone of economics. Demand is the quantity of a product the public demands; supply is representative to what the market can offer. If supply is high--yet demand is low--prices will go down for the goods. If the demand is high--yet the supply is low--the price for that product will go up. A supply relationship is created when producers meet the price that people are willing to pay for a product, as long as the supply does not overcome the demand. When supply reaches a point where it is equal to demand, an equilibrium is created.
In some instances, manufacturers will slow down production to raise prices. This is called supply manipulation. The producers will cause a spike in demand, so that they can get more money for their product. Peter Chubb (2009) of PR News argues that supply manipulation is wrong. He argues that, in today's market, hype and commercialism of a product can produce a false since of need and thus cause a manipulated supply shortage. The perception of supply is as important as the reality of the supply. People will have false demands and purchase a product for fear of a price raise, if their perception of a shortage is manipulated by fear.
Resources may be limited for a variety of reasons. If the resource consists of an agricultural product, the resource could be limited because of the weather, blight or other natural occurrences. If the resource is considered non-renewable--such as oil or natural gas--industry accidents, international trade agreements and the environmental policies within a government may cause the resource to be limited. The supply of oil is sometimes dictated by oil producers ability to produce. Some oil companies will stock pile oil to raise the price during slow consumption seasons. This is considered a manipulation of the supply and demand cycle; it is frowned upon by economic watch dog groups.
Distribution of Goods
The distribution of goods is decided by both supply and demand. In the distribution of goods process. a specialized economy drives the cost of the product. Distributors lower the cost of free market transactions by taking advantage of the economies of scope and scale. Stores and middlemen act as distributor, because it would be expensive and sometimes impossible for the average consumer to buy directly from the producer. The distributor buys in bulk.This brings down the cost of shipping and transportation, because the products can be delivered in bulk. The distributor provides a venue, at a profit, for the consumer to purchase the product.
Don Rainwater has been a professional writer since 2005. Rainwater has published books including "The Jack Russell Terrier: Canine Companion or Demon Dog" and "How To Manage A Behavior Classroom." He holds a Bachelor of Arts degree from the University of Northern Colorado, a Master of Arts degree in special education and a Doctor of Education degree from the University of Phoenix.