The Market Business Questions Essay Example | Topics and Well Written Essays - 1500 words

The Market Business Questions - Essay Example According to the article, the price of eggs has more than tripled and this may have a similar effect on the prices of biscuits. The market for biscuits will be affected in the sense that high prices caused by an increase in the cost of an input will increase the price of biscuits. The demand for biscuits will fall drastically given the fact consumers are price conscious. According to the rule of demand, customers are willing to buy more at fewer prices and buy less at higher prices. This is illustrated by the diagram below: P D P2 P1 D Q2 Q1 Q The sale of biscuits will no longer be lucrative because businesses will be recording low sales volumes. This will result in most of the business closing down such lines of businesses or resort to importing biscuits produced outside the British market. This can be explained by the fact that foreign biscuits are produced cheaply hence less expensive. Textbook economic theory would agree with the statement â€Å"it is no longer about price, it i s about supply.† According to the law of supply, all other factors being equal, as the price of a good or service increases, the quantity of goods or services offered by suppliers increases and vice versa (Altman, 2004, p. 39). Suppliers will be more willing to supply eggs given that they fetch very high prices in the market. This is to maximize profits from the supply of eggs. This is explained in the diagram below: P P2 S P1 S Q1 Q2 Q Q2. A mixed economy is characterized by the presence of both public and private institutions. The two institutions are involved in addressing the needs of consumers and solving economic challenges that may exist in the market. Consumer needs and demands can be addressed adequately when the institutions utilize existing opportunities in making goods and services available in the market. According to principles of economics, scarcity refers to a situation whereby the available resources in an economy are not adequate to meet the needs of the econ omy. This results in consumers having some of their needs unsatisfied. Depending on the demands of consumers, the government has the responsibility of analyzing and determining their level of importance in improving the welfare of the consumers. The government also determines the appropriate procedures to be used in addressing such needs. Opportunity cost can be defined as the cost of a foregone alternative. For instance, the concept opportunity is best illustrated in a situation whereby someone decides to become an entrepreneur after completing college. In such a case, the person gives up the chance of getting fulltime employment and the opportunity cost of his decision to become an entrepreneur is the monthly income and allowances attached to the fulltime job. The two concepts of scarcity and opportunity cost are very important to the government given that the government collects revenues and uses them in running the economy. The government has the responsibility of making sure th at the economy is running smoothly by spending its revenue on essential projects. Government spending should be influenced by a number of factors such as challenges, costs and benefits of such projects. The government needs to develop a list of all the projects it intends to put in place and determine their relevance to the economy (Cassel, 2002, p. 122). This means that the governme