Understanding Substitute Goods- How Supply and Demand Affect Your Choices

Understanding Substitute Goods- How Supply and Demand Affect Your Choices

The law of demand states that the quantity of goods purchased varies inversely with the prices. In other words, the higher the price of goods and services, the lower the quantity the consumers would be willing to purchase (Kakarot-Handtke, 2014). The law of demand has impacted my life in certain ways; I have not purchased my own house, and I’m living in a rental apartment because the purchase prices of the houses are quite high because of the high demand for these houses. On the other hand, I have been able to purchase my favorite Apple mobile phone because its prices have dropped, and there are many substitute mobile phones. It is true that when the prices of laptops increased due to high demand, I decided to go for a desktop, which is a good substitute at a lower price.
The law of supply states that when the prices of items increase, the supply will increase. Traders will always look for markets where their goods would fetch higher prices. However, when supply surpasses the demand, the prices will automatically drop (Handerson, et al., 2013). The law of supply also affected me in many ways; while I was purchasing books and other school materials during school opening days, the prices of the items were high, and thus, the traders increased the supply to tap into the high prices. Therefore, I bought the goods at a much higher price than the normal prices we know. However, when the opening days were over, the prices of the school materials dropped; consequently, the traders reduced their supply.
When COVID-19 struck, many countries declared movement restrictions, and thus, this directive affected the supply of commodities. The supply of imported food, such as fruits and cereals, was reduced, thus pushing the prices high. I failed to purchase these food items because they were not available in my local market. These food items were found in far-flank markets, and the limited supplies had more than double the normal price. Therefore, I could not afford to purchase. The price change indeed had an impact on my buying decision. In the place of fresh fruits, I decided to purchase processed fruit juice as a substitute.

References

Handerson, H, et al. (2013). Supply and Demand: The General Laws of Supply and Demand. Createspace Independent Pub
Kakarot-Handtke, E, (2014). The Law of Supply and Demand: Here it is finally. Retrieved from https://ssrn.com/abstract=2481840 or http://dx.doi.org/10.2139/ssrn.2481840

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Primary Response: Within the Discussion Board area, write 200–250 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions with your classmates. Be substantive and clear, and use examples to reinforce your ideas.

Understanding Substitute Goods- How Supply and Demand Affect Your Choices

For this Discussion Board, please complete the following:

The laws of supply and demand are both important to your decision-making. These laws determine how much something costs, whether you can afford it, and how much is available on the market. Sometimes prices are not what we want them to be. You might choose to purchase a different product or service. This is known as buying a substitute good. Substitute goods replace what you most want to buy but somewhat satisfy the same purpose.

Please watch the following video to review supply and demand:

What is Supply and Demand?

Discuss the following:

How has the law of demand impacted your life?
For example, have prices increased or decreased, making the quantity you purchase more or less?
When prices increase, did you choose to purchase a substitute good?
How has the law of supply impacted your life?
For example, has there ever been a limited amount of something you wanted to buy?
When the amount was limited, how did the price change?
Did the price change influence your buying decision?