Question

1. What is the impact that supply and demand have on pricing? Provide at least three examples from your experiences. 2. What are the difficulties a new business will face due to the current market conditions? Please discuss at least three different difficulties. 3. How do seasonal fluctuations affect the economy. Please provide at least three questions. 4. Select an industry (such as automotive etc. )and discuss the effects a recession will have on it.

Answer 1

1. What is the impact that supply and demand have on pricing? Provide at least three examples from your experiences.

Supply and demand have opposite impacts o pricing. As supply increases, price drops. As demand increases, price increases.

· For example, we bitcoin mining increased the demand of graphics cards, their prices increased far above their usual price.

· As generic drug manufacturers enter the market, the supply of drugs increases and the price drops substantially.

· In the last few months, supply of oil increased much more (due to Russia-Saudi Arabia competition) while at the same time demand dropped substantially due to covid. This led to historic drop in oil prices.

2. What are the difficulties a new business will face due to the current market conditions? Please discuss at least three different difficulties.

· A new business will face demand drop drastically as people will reduce all non-essential buying in the pandemic.

· The supply will also be reduced as transport is restricted. Even the items which the consumers do want to buy wont be supplied easily.

· As the business faces demand and supply crunch, it will also have less money for its operational purposes. This will lead to reduction in operations.

3. How do seasonal fluctuations affect the economy. Please provide at least three questions.

· Seasonal fluctuations reduce demand of certain items. For example, demand for ice-creams drops in winter.

· Seasonal fluctuations also increase demand of certain items. For example, sales of ACs increase in summer.

· Seasonal fluctuations also affect supply of raw materials such as labor. For example, during Christmas many migrant workers go back to their home countries. This affects the production schedule.

4. Select an industry (such as automotive etc. )and discuss the effects a recession will have on it.

Lets take the example of automotive industry only. The following will be effects of a recession on it.

· The first impact recession will have is on demand. Recession will result in people focusing on buying essential items only. That means automobile demand will drop sharply.

· As recession takes hold, people will start defaulting on their existing loans. This will make banks less amenable to loaning further. They will restrict credit and that will affect both customers and suppliers. They both wont have credit, crashing demand further.

· As credit crunch takes place, it means credit facilities will dry up and money flow will be less. Many automotive industry players such as dealers, are very dependent on constant movement of money. If they don’t have enough money and huge inventories are not selling, they will run big losses.