Avinadav, T., Herbon, A. and Spiegel, U., 2013. Optimal inventory policy for a perishable item with demand function sensitive to price and time. International Journal of Production Economics, 144(2), pp.497-506.

Herbon (2013), have illustrated that increase demand of a product is due to the many reason such as consumer purchasing capacity increases, fallen of complementary goods price, product in demand due to latest fashion or consumers tastes etcetera. All the above-mentioned factor result in the price variance of any product. It has also been seen that growth in number of people using any certain product due to population growth and expansion in the market result in to increase in product demand.

Environmental Economics. 2017. Econ 101: The Basics of Supply and Demand. [online] Available at: https://www.env-econ.net/supply_demand.html [Accessed 15 Aug. 2017].

According to the researcher, the price of the product can change because of four major factors namely Demand increase or decrease and Supply increase or decrease. According to the researcher, there is a universal statement that people at higher price of any product buy less quantity whereas a seller want to sell more quantity when the price is high which reflects that, quantity demand is inversely related with the price and the quantity supplies and the price are somewhat directly related to each other. It reflects on the people mindset that selling of product for profitability will be severely hampered depending on the price and the supply also on the demand of the product in the market.

Kilkki, O., Alahäivälä, A. and Seilonen, I., 2015. Optimized control of price-based demand response with electric storage space heating. IEEE Transactions on Industrial Informatics, 11(1), pp.281-288.

According to Seilonen (2015), decrease in consumer surplus would happen when equilibrium price of the product is set above, but lower in the equilibrium price will see certain increase. According to the author’s to achieve consumer surplus, consumers have to purchase the good that means production should be maximum so that consumer can have ample amount to purchase. If due to any reason the price of the good drops below market equilibrium, manufacturing of the good will be less profitable as of the low price and thus will encourage customers to buy more product as of the lower price. The market will have shortage of good because of the huge demand resulting into market wide loss. Thus the producer will not be able to obtain the value of the product.

Siano, P., 2014. Demand response and smart grids—A survey. Renewable and Sustainable Energy Reviews, 30, pp.461-478.

The researcher states that the amount of product present in the market is the supply and the number of people willing to buy the product is the demand. In addition, supply has direct influence in the demand say for an example if there is a strong demand of Gas in the market there would be less supply of the product, thus increase in price of the commodity. If there is a change in condition such as lower demand of the product (Gas) as people started using more and more number of electronic vehicle then the product will be highly available in the market thus will decrease the price of the product. Income effect can also be a resulting factor as it will help the people decide how much and at what price to buy. People tend to reach out to business, providing lower price but when there is an increase in purchasing capacity, the product of lower value will become inferior good, as there is a demand fall because of income rise.

Zhao, Z., Wu, L. and Song, G., 2014. Convergence of volatile power markets with price-based demand response. IEEE transactions on Power Systems, 29(5), pp.2107-2118.

In the research it has been found that decrease in demand occurs because of the product is out dated and old fashioned. People’s taste of the commodity has decreased, Decrease in consumer’s purchasing power and substitute product price drop. The decrease and increase of a product’s price is variable on the products supply and demand in the market. However, consumer having higher purchasing capacity or lower purchasing capacity both will opt for products with lower price as this give them the option to purchase more and different products.

It is reflected in research that if the purchasing power of the consumer increases, the variance of the purchased product will be bit expensive than regular, thus making the regular product inferior good. Demand of any product depends on various factors but lower price will be the prominent factor, as it will give purchasing power to the consumer.

References

Avinadav, T., Herbon, A. and Spiegel, U., 2013. Optimal inventory policy for a perishable item with demand function sensitive to price and time. International Journal of Production Economics, 144(2), pp.497-506.

Environmental Economics. 2017. Econ 101: The Basics of Supply and Demand. [online] Available at: https://www.env-econ.net/supply_demand.html [Accessed 15 Aug. 2017].

Kilkki, O., Alahäivälä, A. and Seilonen, I., 2015. Optimized control of price-based demand response with electric storage space heating. IEEE Transactions on Industrial Informatics, 11(1), pp.281-288.

Siano, P., 2014. Demand response and smart grids—A survey. Renewable and Sustainable Energy Reviews, 30, pp.461-478.

Zhao, Z., Wu, L. and Song, G., 2014. Convergence of volatile power markets with price-based demand response. IEEE transactions on Power Systems, 29(5), pp.2107-2118.