Micro economics

MAIN BODY

Market demand and supply elements in order to study changes in product prices

The very concept of market demand and supply is developed in order to ascertain the impact it has on the pricing effects of the product. According to the author, Grafton, Horne and Wheeler (2016), the law of demand and supply states that when the demand for a particular commodity will increase, its supply in the market will decrease and when the demand will decrease, the supply will increase accordingly. The authors have further illustrated the manner in which price gets affected. The supply of a particular product is more that the demand of that product, the prices of the particular product falls since there are many suppliers of that product. Similarly if the demand for a particular product is more than the supply of that product in the market, then the prices of such products tend to increase since there is demand but supply is not adequate enough.

Another article published by Gurran and Phibbs (2015), illustrates that further if the demand is assumed to be constant i.e. it remains unchanged, then the increase in the supply of a particular commodity will lead to a fall in the price and the decrease in supply will lead to increase in the price of that particular product. Similarly, there direct relationship exists for demand and the price of that product as well. When the demand of a particular product increases with supply remaining constant, it tends to increase the price as well. The author concludes that this increase and decrease in supply and demand keeps on continuing and they reach the stage of equilibrium when the supply of the product becomes exactly equal to the demand of that product thus leading g to a fixed price at which the market forces are currently operating.

The above articles help in concluding that supply and demand acts as independent market forces and the price is the dependent factors on these two market forces.

Impacts and reasons behind government intervention by applying these concepts

Government Interventions are basically devised in order to control the existing market forces and regulate the impact these market forces have on the prices of commodities in the market. The authors, Winans, Kendall and Deng (2017), illustrate the reasons behind implementation of such government interventions in the economy and they state that these are mainly implemented to bring the economy in control. The primary reason is to ensure that the economy does not move towards market failure. Market failure is an economic situation where in the free market, allocation of different goods and services is not done in an appropriate manner and there is a loss in overall economic value. However, there are many additional factors that are quoted by the researchers such as equitable and just income distribution so that gap between the rich and poor can be bridged and the prices are placed in an equitable manner.

Additionally the research paper published by Howell, Noellert, Kreier and Wolff (2019), details on the impact of such implementation of government interventions in the market situation. The researchers highlighted that the major impact is that it minimises the fluctuations and unpredictability of the economy and when government forms appropriate norms, it helps in ensuring that there is no significant swing in the economy and it operates on a balanced track. Also, the interventions impacts the infrastructure of the market where they run efficiently and effectively and the state of monopolistic market conditions does not gets formed in a particular economy or market. These interventions are implemented by the government in the form of lowering or increasing the interest rates, granting subsidies or implementing tax controls which help in achieving the desired market stability by such government intervention implantation.

However, the authors have also argued that these government interventions have certain negative impacts. Sometimes these government interventions are too strict for the economy to operate freely and therefore the stringent conditions lead to distortion in the market.

Impact on organisations regarding failure to respond to government policies

The authors, Sahin, Siems, Stewart and Porter (2016), have stated that there are a variety of policies that the government formulates through which they are able to implement the government interventions that will assist in controlling the current market conditions and forces. Tax controls, granting and removing of subsidies are some of the measures that can be implemented in the economy in the form of government interventions. However, if the organisations that are operating in the economy do not comply with the government interventions that have been adopted, there are some serious implications that can arise. The organisations might not be able to operate in the market and further lose their license to trade in the market. Additionally, the authors have also stated that there are other graver consequences like suffering heavy losses, refusal to trade with the company, refusal of government to grant any protection or benefit in the manner of tax deductions or exemptions, subsidies etc. These are the extreme-level measures that get implemented on the organisation that is failing to comply with the government interventions.        However, the authors have further stated that sometimes these government interventions might not be beneficial for the organisations. For example if the regulations and permits are being made stricter to obtain than the businesses might shut down and people would avoid venturing in that particular sector which might lead to the GDP of the economy losing a significant market share that otherwise could have been gained in the economy. Therefore, the implementation of government intervention might or might not be beneficial for the public and the companies that are operating in a particular economy but compliance is still mandatory and an organisation cannot operate fi they tend to fail to conform to the policies thus formulated.

Role of non-monetary socio-cultural factors on economic analysis

Economy is made up of the people and these comprise different societies and other tribes which are operating in an economy. Therefore, it is very critical to analyse the impact of these social-cultural factors and other non-monetary measures on the economic market forces and the manner in which they are able to impact the implementation of government policies and interventions in a particular economy. Authors, Paris (2017), state that, the non-monetary factors are the maximisation of social welfare practices, national unity, minimising of gap between the rich and poor are some of the non-economic factors that the government can focus on. These do not have a direct impact on the economy but are rather linked in an indirect manner. Therefore, non-monetary factors assist the government in promoting fairness in the way their economy is operating and ensures that a particular section is not receiving unjustified benefits.

Another research paper published by Gurran and Phibbs (2015), state that there are many other socio-cultural factors as well that a government needs to keep in mind before they are implementing the interventions in a market. Welfare programmes, community services, organising and implementing various environment and sustainability laws, developing quotas and reservations are also adopted. These helps in protecting those segment amongst the public that are not adequately self-dependent and need to be protected from other more dominant sectors residing in the public so that their rights can be protected as well and their well-being is ensured.

Therefore, it can be concluded that the market forces are heavily regulated by various government interventions and therefore, it involves and considers a variety of aspect before they are implemented such as the impact on society, economy etc. and it is not necessary that these are always related to the price aspect.

CONCLUSION

The research conducted in the above report helps in concluding that there are various government interventions that are implemented in the economy based ion the performance of the two independent market forces i.e. supply and demand. It was concluded in the report that price is dependent on these two market forces and therefore is ascertained on the movement of supply and demand in an economy. Further, the report also identified the impact of implementation of government interventions and the consequences such as restriction on trading in case the companies fail to comply. Lastly, the socio-economic and non-monetary factors that are used in government intervention programs. For students who want to understand these complex dynamics, online homework help can provide valuable knowledge and help in understanding these topics...

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