Eco 212 - Supply, Demand and Price Elasticity Paper

Supply, Demand and Price Elasticity Paper

Principles of Economics /ECO212

Oct 12, 2010

Supply, Demand and Price Elasticity Paper

Supply and Demand Pricing

The laws of supply, demand, and pricing are the most fundamental concepts in economics that relate the supply condition or the availability of a commodity or service to the demand for that commodity and service so as to fix the price of that commodity or service in a free market economy. If the demand or the need for a commodity or service is high and the ability to manufacture, process or supply the commodity or service is poor, there are likely to be more buyers who will be willing to pay a higher price to purchase the commodity or service that is required. Thus, poor supply conditions with high demand conditions result in higher prices, while an excess of the commodity or service in poor demand conditions will result in a lowering of the prices in an effort to boost consumption (Marshall, 1975).

The laws of supply, demand, and pricing can be seen in action daily in any region, market, neighborhood, or locality. Many news items are published reporting the supply, demand, and pricing of products or services because this information is of high importance to many individuals whose lives may be impacted by the fluctuations. A very recent article reported that the demand for printed circuit boards or PCBs that are required in nearly all electronic products or electronic consumer goods had slumped, due to a decline in the demand for these products in the global market. China has become a major producer of finished electronic products as well as components due to cheap, skilled and disciplined labor and investments by electronic manufacturing multinationals. A recent report by Anny Li, an analyst for iSuppli, which was published in Digitimes daily IT news, presents the decline PCB prices as a result of a slump in demand (Anny, 2005).

In this brief paper, an analysis of the news report related to the price of the PCB is presented to illustrate how supply and demand conditions can influence prices.

The Decline in the Prices of Electronic Printed Circuit Boards as a Result of a Reduced Demand for Electronic Goods

The news article presented by Anny Li describes how the demand for electronic consumer goods had boomed after the ending of the global recession, with new acquisitions by many of electronic items. Every electronic product has a printed circuit board fitted into it which mounts discrete electronic components and provides electrical connectivity between them in order to bring into existence the designed circuit. The electronic PCB is itself manufactured using materials such as copper and laminate.

During