Economics of Innovation Identities Shape

Question: Discuss about the Economics of Innovation for Identities Shape. Answer: Introduction Food and beverage manufacturing industry in Australia is the largest contributor to the countries` GDP. The industry constitutes about a third of all the countrys entire manufacturing sector. Products and resources in this industry are some of the products whose demand and supply keeps changing regularly. The changes in demand and supply of products in this sector have a very big impact of the stability of the economy in general (Arnold, 2010) In economics, demand is defined as the amount of goods or services that a given person is willing and capable of purchasing at the prevailing price and at that particular time (Bannered and Duflo,2011).This means that for demand to occur, the person must be both willing and capable of buying no that particular good or service. The increase in exports in the food and beverage industry in the country is an indication of increase in demand of the products in other countries. Supply is defined as the amount of goods or services that a producer of a certain good or service are willing and able to deliver to the market at the prevailing prices at that particular time. Willing to sell without the capability cannot qualify as demand and vice versa. The above statistics make prove that the industry is depended upon by very many people in the country. For this reason, it is important to explore the factors that drive demand and supply of goods in this industry. The essay discusses the factors that influence how much producers are willing and capable of delivering to the market as well as the amount buyers are willing and capable of purchasing at a given market price. An example of a resource that is used in the production of foods is the wheat and barley. According to the Australia Food and Grain report, the demand for wheat in Australia in the year 2016 was about 28 million metric tonnes.The supply for wheat in Australia was about 24 million metric tons. This means that there was a shortage in the country since the demand of the product exceeded the supply. Another resource that is commonly used in food manufacturing is barley. The production of wheat for the year 2016 in Australia was 8.5 million MT. There was a very slight change from the previous year when production was at 8.45 million MT. The yield per hectare was estimated to be around 2.0 MT. The demand for barley in Australia is less than the supply. This explains why the country exported 6 million metric tons of barley in the year 2016. The major factor affecting the demand of a resource or a particular good or service is the price (Russel, 2014). This is the basic determinant of demand and supply of any resource. This is what brought about the law of demand and supply. The price elasticity of any resource will determine the extent to which a unit change in price will affect the demand of the product. The following are the factors apart from price that might have caused the changes in demand of the above products; Consumers taste and preferences is also an important factor that determines the level of demand of a particular good. When consumers tastes and preferences match with what supply in the market, the demand for product will increase. If the tastes of the consumer do not match what the producers offer, the demand for the product will be low. Changes in tastes and preferences of a consumer change with time depending on factors such as fashion and the effects of advertisement. Tastes and preferences on goods such as wheat may result from health and nutritional concerns of the consumer. Another important factor affecting demand is the level of incomes of consumers. Rise in consumer incomes increases demand for products while a reduction in consumer incomes lowers their demand for products. This law however applies to normal goods only. Increase in income will increase the demand for a product by increasing the amount of disposable income. This will in turn improve the purchasing power of a consumer meaning that he/she will tend to consume more of the product. For example the increase of incomes for will increase their purchasing power which means they consume more beer. Increase in demand for beer will in turn cause the demand for barley to increase (Akerlof and Kranton, 2010). Changes in prices of related goods will also affect the demand for products that are consumed together. These products are referred to as complementary goods. Increase in price of one product will reduce its demand and therefore the demand of the other product will also increase. The number of consumers of a product in a particular market will affect the demand of that product. When the numbers of the people who consume a product increase, the demand of the product will also rise. The decrease in the number of people consuming a particular product will result to a decline in demand (Swann, 2009). The supply of any product is determined by the many different factors such as Seasonality in production. This mostly applies to goods which are seasonal in nature such that when its the pick season, the supply will be high and when it is off season, supply will reduce. Another factor that determines supply is the expected rise or fall of prices of a product in future. When suppliers expect the price to rise, they will hold their goods waiting for prices to increase hence increases in supply. Expected fall in prices will increase the supply in the short run. The cost of production is another very important determinant of supply. When per unit costs of production are high, producers will produce less hence the supply will decline. Low costs of production will mean higher profits margins for producers hence leading to a rise in demand (Eisenstein, 2011). Other factors that determine the supply of a product are technology, government policy and price of related goods. Conclusion The supply and demand of a particular product varies from time to time and from place to place depending on different factors. The factors that affect the level of demand and supply of a product ranging from price will determine whether there is surplus, shortage or equilibrium state. Factors affecting demand and supply in one industry may not affect the same in another. An example is that weather affects the production of agricultural product but does not affect the supply of cement in the market. Changes in consumer tastes and preferences have also had tremendous impact on level of demand and supply of a given product. This calls for producers to stay in touch with the changing trends in order to maintain high demand for their products. References: Eisenstein, Charles. Sacred Economics: Money, Gift, Society in the Age of Transition. Berkeley, Calif: Evolver Editions, 2011. Internet resource. Arnold, Roger A. Economics. Australia: South-Western Cengage Learning, 2010. Print. Banerjee, Abhijit V, and Esther Duflo. Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty. New York: PublicAffairs, 2011. Print. Russel, . The Economics of the Roman Stone Trade. Corby: Oxford University Press, 2014. Print. Akerlof, George A, and Rachel E. Kranton. Identity Economics: How Our Identities Shape Our Work, Wages, and Well-Being. Princeton: Princeton University Press, 2010. Internet resource. Samuelson, Paul A, and William D. Nordhaus. Economics. New Delhi: Tata McGraw Hill, 2010. Print. Swann, G M. P. The Economics of Innovation: An Introduction. Cheltenham: Edward Elgar, 2009. Internet resource.