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UNIVERSITI MALAYSIA SABAH

Labuan International Campus


Faculty of International Finance

Semester 2
Session 2015/2016

GROUP ASSIGNMENT GT00703


(MICROECONOMICS)

Prepared By :
Bil

Name

Matric Number

Course

1.

NurJalilah Binti Radzuan

BG15110393

HE20

2.

NurJanna Binti Macapagal

BG15110394

HE20

3.

Nur Faidah Binti Sali

BG15110385

HE20

4.

Elsie Luther

BG15110112

HE20

5.

Goo Mei Xin

BG15110135

HE20

Prepared To :
Miss Nur Shahirah Binti Azman

TABLE OF CONTENT

Page

1.0

Introduction

2.0

Factors that could shift the demand curve

3.0

4.0

2.1 Price

2.2 Seasons

2.3 Substitute Goods

2.4 Tastes and Preferences

2.5 Expectations

Factors that could shift the supply curve


3.1 Price

3.2 Seasons

3.3 Producer goals

3.4 Expectations

3.5 Substitute Goods

A supply-and-demand graph
4.1 Supply of Bananas

2
4.2 Demand of Bananas,
Apples and Grapes

4.3 Market of Oranges

5.0

Conclusionm

10

6.0

The Article

11

7.0

Reference

1.0 Introduction
In economics view, demand is the expressions of willingness and abilitiy of a
potential buyer to acquire certain quantities of an item for various possible prices
the buyer can reasonably offer. Demand can be thought of as a schedule of
prices and quantity in the mind of the buyer. In addition, the law of demand
postulates that the relationship between price and quantity in the mind of buyers
is inverse. Moreover, the law of demand is represented grapichally by a
downsloping demand curve and it is also explained by the diminishing marginal
utility, the income effect, the substitution effect and with the help of indifference
curve analysis.
While on the other hand, supply is a willingness and ability of sellers or
suppliers to make available different possible quantity of a good at all relevent
prices. In addition, the law of supply postulates that the relationship between
price and quantity in the mind of sellers or producers is a direct one. When prices
increase so does quantities. Moreover, the law of supply is explained by price
being an inducement for sellers or producers to sell more and also cost of
production increasing due to the law of diminishing returns.
Additionally, equilibrium3is the price and quantity whereby demand and
supply intersect. At any price above that equlibrium, the quantity supplied
exceeds the quantity demanded, which result in a surplus and no transaction
between seller and buyer. In contrast, at any pice below, the quantity demanded

exceeds the quantity supplied, which results in a shortage. Thus, only at the
intersection of demand and supply are the quantities demanded and supplied are
equal whereby the price and quantity equlibrium are stable.
Referring the article, there were a significant changes of the demand and
supply of bananas, apples, grapes and an oranges in a market of South Indian
households. This is generally due to the factors that influencing demand such as
prices of other goods whereby there is an increasing and unpredictable changes
in the market price of those fruits. Furthermore, the cost of production and the
price of the good is affecting the supply of those fruits. Last but not least, there
were an uncertain changes of demand and supply of South Indian market due to
its determinants factors.

2.0 Factors that could shift the demand curve


2.1 Price
Based on the article there are few factors that affect the demand for the Orange.
Price of the Orange one of the factors quantity demand for Orange is high. The
price of Orange is cheapest than the price of apple and bananas. When the price
of orange is more lower the demand for the Orange will increased. If the price of
Orange more cheap the quantity that society can buy will increased because the
society can buy the Orange with small amount of money. Meanwhile, when the
price of Orange is high the quantity demand for Orange will decreases affect by
the price. Society has a limited power to buy the Orange due to the increasing of
the price. They will buy in a small quantity if the price of Orange decreased.
2.2 Season
Otherwise, season also give4an affect the quantity demand of Orange. When the
season for the Oranges arrive the quantity of orange will increase and caused
the price for Orange will decreases to prevent the dumping of oranges on the
market. Demand will increase due to the declining price of Orange because when

the seasons of orange the productivity of the Orange is high. The society will
take advantage of the cheap price of Orange and they will bought in large
quantities. If there no season for the Orange the price will back to normal or the
price will increases because the productivity of Orange will decreased. The
demand will decreased because the changing in the price due to the decreased
in productivity of Orange.
2.3 Substitute
Substitute is a good that can serve as replacement for one another when the
price of one increases demand for another will increase. The article show orange
is a substitute for the bananas, apples and grapes. When the prices of the
Orange more cheap than the price of the substitute the quantity demand for
Orange will increase. The society will make comparison between the price of
Orange and price of substitute. In this article the society will choose to buy for an
Orange because the price of Orange more cheap than the price of substitute. The
quantity demand for Orange will increases and the quantity demand for
substitute will decreased. Meanwhile, when the price of the substitute more
cheap than the Orange the society will choose to buy the apples, bananas, and
grapes and the quantity for Orange will decreases.

2.4 Tastes and Preferences


Changes in tastes and preferences of the society will affected the demand for the
orange. When the society change their tastes where they more like to eat
Orange, the demand for the orange will increased. Meanwhile, when the society
tastes change where they more prefer to bananas, grapes and apples the
demand for orange will decreased.
2.5 Expectation
Expectation which the people may have expectation about future change in price
og goods and these expectation will affect the quantity of good that you buy
5

today. When the expectation society about the price of orange will decreased in
future they will decreased the quantity that they might buy todays and the
demand will for orange today will decreased. Meanwhile when the society expect

the price of orange will increase in the future they will increase the quantity of
the orange that they buy and the demand for orange today will increase.
Expectation of society will affected the demand of good whether the quantity
demand will increased or decreased based on the expectation that the society
made.

3.0 Factors that could shift the supply curve


3.1 Price
The first factors that lead to movements along the supply curve is change in
price of a good or service. With an assumptions that the other factors are fixed or
we called as ceteris paribus, when the price for goods or service is rising, then
the quantity that supplied by firm also will increase. But, the lower the price for
goods or service, the less the quantity supplied by firm. In this case, the quantity
demanded for banana is increase but when the production of banana has
diminished, the producer binding the higher price for the selling of banana in
market, causing a shortage. This situation make consumers prefer to buy orange
because the price is more cheaper than the price for banana, apple and grape in
market.
3.2 Season
The factor that shift the supply curve is season factor. In Kerala, banana
plantations were damaged in the heavy rains during June and July. It caused the
price for banana is rise. For the past year, the banana is selling only for Rs30-40
per kg. But, after the banana plantations area were damaged, the price rise to
Rs50-60 per kg. Therefore, the supply curve for banana will shift to left. However,
the production of oranges in Nagpur has been increase almost doubled for that
year. When the orange is selling only Rs40 per kg, the consumers prefer to buy
orange. So, the supply curve of orange will shift to right.
3.3 Producer goals

Besides, the other factor that shift the supply curve is the producer goals. Each
firm or producers have their own production goals. If their goals is to maximize

the selling for increase social welfare, the firm or producer will increase the
quantity supplied of goods or services. But, their goals is to maximise their profit
or to dominate the market, so the firms or producers will decrease the quantity
supplied of goods or services. In the article, we can see that the producer for
orange produce more orange and supplied a large quantities of orange in market
because they will get a higher profit by selling orange. Moreover, the price for
orange is more cheaper than the price for the other fruits.
3.4 Expectations
The expectations of future price also one of the factor that could shift the supply
curve. The expectations of changing in price for the future also effect the firm or
producers desicion in the quantity supplied by them. The supply for the orange
definitely high for that year because the demand for orange is more than the
other fruits due to the price for each fruits. However, Liaqat Ali ,owner of AB
Vegetables and Fruits says that it is too early to predict supply and demand for
orange. So, in this case the producers for orange still have to wait until JanuaryFebruary for the demand for orange goes up.
3.5 Substitutes goods
The last factor that could shift the supply curve is substitutes. Substitutes good is
define as goods that can serve as replacements for one another. It happen when
the price of one increases, then the demand for the other also increases. For
example, the banana which used to sell at Rs30-40 per kg in the past year are
now retailing at Rs50-60 per kg because the productions of banana decrease
when the banana plantations were damaged by the heavy rains in Kerala. When
the price of banana is increase, consumers prefer to buy orange because the
price for orange is cheaper than banana.

4.0 A supply-and-demand graph


4.1 Supply of Banana

S
S

Price of banana
(per kg)

0
Q

Quantity of
banana

Diagram 1. Supply of banana


As shown in Diagram 1, the supply curve of banana had shifted to left from S to
S, the price had risen from P to P, quantity of supply had moved from Q to Q
and the equilibrium point is shifted from E to E. The diagram showed the price
of banana had risen. The shortage of bananas have affected its price become
increased.

4.2 Demand of Bananas, Apples and Grapes

Price of banana
D
D

Quantity of
banana

Diagram 2. Demand of bananas, apples and grapes


According to Diagram 2, since the prices of the bananas, apples, and grapes
increased, the demand curve of these 3 fruits shifted to the left from D to D.
This made increased the demand of oranges.

4.3 Market of Oranges

P0

E
Q

E
Q

Quantity

Price of orange
(per kg)

Diagram 3. Market of oranges


In Diagram 3, the supply of curve of oranges shift to the right from S to S which
means that the increase in supply of oranges, the demand of oranges also
increased and demand curve shifted from D to D, the quantity of oranges
increased from Q to Q, the equilibrium point moved from E to E, but the price
of oranges still remain the same at P. We can conclude that the price of the
oranges will not change when the demand and supply of the curve increased at
the same time.

5.0 Conclusion
10

Based on all of the factors that have be effect the demand and supply of market
of orange we can conclude that market of goods or service will shift to the right
or to the left depand on the factors. Demand curve will shift to the right if there

have an increases in demanded and will shift to the left if there are decreases in
demanded. There are same for supply curve.

As we can see there are have an increase in demand for market of


oranges. Factors that could shift the demand curve for this market is price,
seasons, substitute goods, expactations and taste and prefrences. The main
factors of demand for oranges have increases is because the price of substitutes
goods for oranges, which is apples and banana are higher than oranges. The
price of oranges is more cheapest, so the curve of demand will be shift to the
right due to the increases in demanded of oranges.

Factors that could shift the supply curve include chnage in preference,
change in income, changes in technology; or changes in the number of firms in
the market. But as we can see for market of orange, the main factor that shift
the supply curve is the seasons. In the same time, due to the seasons, price of
banana had increase and this were lead producer to produce more oranges
cause oranges have less cost of production than banana. This show that banana
is the substitute good for oranges that make the demanded of oranges increase
when its price increases.

Last but not least, because of the market of oranges that have becomes a
favourite fruit for that season and had increases in demanded and supplied make
the other fruits such as apples, bananas and grapes are decreases in demanded
and their supply-and-demand curve will shift to the left.

6.0 The Article

11

With costly bananas, apples and grapes, orange becomes favourite fruit this
season

Sutanuka Ghosal & PK Krishnakumar,


ET Bureau Dec 19, 2013,
04.00AM IST

(http://articles.economictimes.indiatimes.com/2013-1219/news/45377538_1_oranges-diesel-prices-supply-and-demand)

KOLKATA|KOCHI: There is a preference for orange among the south Indian


households this season. With apple and grape prices ruling high coupled with a
loss of banana crop in Kerala, orange is the favourite fruit on the breakfast table
among south Indians. Orange is selling at Rs40 per kg whereas banana, the
commoner's fruit, is selling at Rs50-60 per kg, while apple is priced double that
of orange.
Talking to ET, Orange Growers Association of India working president Amol M
Totey said, "Production of oranges in Nagpur has been very good and it has
almost doubled this year. Huge demand has emerged from the southern part of
the country."
The sudden surge in demand from south India has been triggered by the rising
prices of apples and grapes in southern part of the country. Demand for oranges
are coming from places like Kerala, Hyderabad, Vizag, Bangalore and Chennai. In
Kerala, banana plantations were damaged in the heavy rains during June and
July, causing a shortage and rise in prices. Bananas which used to sell at Rs30-40
per kg in the past year are now retailing at Rs50 - 60 per kg.
Arrivals of oranges have started in the southern markets. Usually the flow begins
in October- November period and extends into the summer season. Nagpur and
Amaravati in Maharashtra are the chief sources for Kerala, Chennai and
Bangalore.
"The supply is definitely high this year but it hasn't been reflected on the prices
as transport charges have gone up due to a hike in diesel prices,'' says Liaqat Ali,
owner of AB Vegetables and Fruits in Chennai. Wholesale prices are around Rs35
per kg, almost the same as in the previous year.
But Liaqat Ali feels it is still too early to predict supply and demand. "We have to
wait till January-February when the demand goes up.'' The main market in
Chennai gets about 150 tonne daily. The supply is likely to increase in the coming
weeks. The boom in orange production is quite evident in Kerala. The supply
points have increased. The retail prices are around Rs40 per kg. "The quality is
good and there is a robust demand for oranges. Kochi main market gets 100
tonne daily,'' says wholesale12trader K A Ashraf in Kochi.
Apples sell at double the price of oranges with the prices of imported varieties
going further up.

Nazar Mohammed, a fruit wholesaler in Maharashtra's Kalamna market said "Till


a few days ago, wholesale price of oranges were hovering around Rs14 -15 per
kg but now it has gone up to Rs18 -22 per kg. Prices will again fall in January
when fresh crop will arrive. Currently, harvesting is going on."

13

Reference
PK Krishnakumar & Sulanuka Ghosal. (2013). With costly bananas, apples and
grapes, oranges becomes favourite fruit this season.
http://articles.economictimes.indiatimes.com/2013-1219/news/45377538_1_oranges-diesel-prices-supply-and-demand