econ 545 redo
stephanieclay1988
stephanie_clay_paper_1.docxRunning Head: DETERMINANTS OF DEMAND AND SUPPLY 1
DETERMINANTS OF DEMAND AND SUPPLY 2
Project Paper One
ECON545 Paper Project 1
Scenario Chosen: A
Business Economics
May 10,2016
By: Stephanie Clay
Introduction
This case will determine, if my niece should attend college to become a doctor and the best school to attend. By doing the proper research, I am hoping to supply my niece with the best advice, depending on my findings, such as; the high costs of tuition, the years of study involved in becoming a doctor, the best location or university to study for the career and the satisfaction driven in becoming a doctor. This helps evaluate if that career choice is an optimum decision for her. Evaluating these factors before deciding on pursuing the career will avoid the disappointment and other dissatisfactions that arise by choosing a career using limited information.
Section 1: Demand Determinants
The law of demand
The law of demand has a direct correlation to the employability of a person who intends to study to be a doctor. The law of demand states that the requirement for a commodity is inversely proportional to its cost or price for any particular product or commodity (Sraffa, 1926). The cost of studying a particular course, therefore, plays a role in dictating its affordability and accessibility to the various individuals. The likely scenarios that would occur if tuition fees are hiked will also be evaluated; the research will be keen to establish whether more people would be willing to enroll for the course even if tuition fees were increased. Factors that would inform their choices to consider enrollments even to the course amidst higher costs will even be explored with keen interests.
A: Determinates
- Population:
The total number of students that cleared high school will determine the level of demand for the course. The higher this population is the higher the demand for the course. A higher number of students clearing high school and qualifying for the course increases the demand for those who want to pursue the course. A lower number of students clearing high school and few qualifying for the course will lead to lower demand for those pursuing the course. It would thus be wise to choose a course that has few students as it comes with its advantages such as quality lectures due to the effectiveness of dealing with small groups of students.
- Income:
My niece’ income would be the second factor for consideration. I would seek to find out her level of income together with her already accumulated wealth. I will also examine her ability to cover comfortably all the fee components outlined for her preferred course. It would be imperative that my niece evaluates her assets and sources of income to understand whether she would comfortably finance her education. This factor is important as in order find out the total income needed to cover the course fees to completion. This would enable us to predict financial difficulties that might be encountered in the course of study and come up with mitigation strategies such as finding extra sources of income.
- Cost of Related Goods:
Very other important factors that would also help my niece in making the decision on her preferred course includes related courses, their costs of study, marketability, duration of study and technicality. Related courses offered by an individual department will be evaluated and their merits and demerits enlisted to highlight the most favorable course to pursue. These factors will be attentively evaluated before settling on a preferred course. It would be wise to pursue cheaper course while also considering their marketability once one completes studying. The technicality involved in a certain course is also an important factor in order to avoid dropping/ swapping courses in the course of studying. Starting a new course is time consuming and expensive due to the indirect costs involved.
- Tastes:
The study will also seek the third aspect of likability. How fundamentally does college going person fancy to study to become doctors? If several people do and have the means to pursue their academic desires, then technically there would be more qualified doctors within a given locality. Such a reality would, therefore, undermine the demand and employability of physicians in a particular geographical area. Considering this prevents one from pursuing a course, which has graduates flooded in the market place. Many people qualified for a given course makes job-hunting more difficult as we are all competing for the same limited number of job openings in the given field. This will thus help my niece to pursue a course where people’s tastes are less in order to be more competitive in the job market.
- Expected Future Prices:
My niece should also consider the future fees for the course. She should choose the course if there are expectations of the fees to go down. However, if she expects the fees to go up, she should consider other courses. Expected increases in the tuition fees for a given course will bring about financial distress to the student trying to find more funds to pay for the increased tuition charges. Considering this, thus, a course whose fee is expected to reduce should be chosen. This enhances savings and lowers financial stress of sourcing for more funds to finance the course.
B: Price Elasticity of Demand
Elasticity of demand measures the responsiveness of quantity demanded to the price. The higher the price elasticity of demand the more a change in the fees will affect my niece choice of course. A course with a lower elasticity of demand should be chosen as the price is less affected by the changes in quantity of demand.
The graph is has a negative slope showing the inverse relationship between the quantity demanded and the price of the goods.
Section 2: Supply Determinants
My research away from the factors related to market will also find out determinants of the factors of supply (Brunner &Meltzer, 1964) that dictate for example the amount of fees required for such courses.
A: Determinates
-Prices of Inputs:
The presence of adequate learning equipment, theater rooms and capacity to handle proper learning exercises will be determined. Appropriate and efficient learning material often justifies relatively high tuition fees. This means that the institution offering the course has invested heavily on inputs to offer quality services to their students. They will cater for the expenses incurred in buying these equipment and facilities by charging high fees to the students who apply for the course. The reverse is true where an institution has invested very little on inputs will charge average fee to the students. Subsequently, the quality of education offered will be lower.
-Technological Change:
Technology influences the extent to which learning institutions and education equipment can be manufactured. Countries or regions with improved or rapidly improving technology will have a better access to the latest education equipment. This will enable them to equip their laboratories and theatres with modern equipment. If the level of technological progress is slow, learning institutions will have limited access to modern equipment and this will affect the quality of education offered.
- Number of Firms in the Market:
The presence or absence of medicine as a course in various learning intuitions can somewhat be linked to lack of finances and technological advances by such institutions. Medicine course requires a lot of equipment and facilities to undertake practical classes. These facilities require money to access. Firms, thus, have to invest tangible resources in purchasing these facilities. Money is a scarce resource and it is not available in abundance. This limits many institutions from incorporating medicine careers into their syllabus. These facilities also require tremendous improvement in technology in the specific institution in order to operate effectively. If these two factors are limited, then medicine courses offered will be limited in a few institutions that can meet these requirements.
- Expected Future Prices:
Where there is an expectation of fees to increase, there will be a higher supply of the course and vice versa. All firms whether private or public are profit-maximizing entities. Thus, if an increase in price is expected, they will produce or supply more of these courses in order to maximize on the profits realized through increased enrollment for the course. If lower fee is expected, institutions will supply or enroll few students to study this course as less revenue and profits will be realized.
Ai: Profit Max/Cost of Production Analysis
The prices in this market are determined by the industry thus making the universities mare price/fees takers. It is not possible for firms here to charge substantially higher fees than what the industry gives. Firms maximize profits where MC are equal to MR. firms are price takers meaning they charge the fee that is determined by the interaction of supply of these course and the demand by those willing to enroll for the course. Thus, a one given institution may not charge or determine the fee charged by other suppliers of the same course. Firms get maximum profits where marginal cost is equal to the marginal revenue. That is, the cost incurred to provide one additional unit is equal to the revenue realized from offering that one additional unit.
Aii: Number of Sellers, Market Structure
The market structure that can be used to explain the industry is perfect market structure. This is because there are many firms in the industry and also many buyers. Moreover, all the players in the market have perfect information on the products offered and prices. There is free entry and exit into this kind of market. The firms also sell similar product or courses to the buyers. The firms are price takers meaning that a single firm cannot fix the market prices. The prices are determined by the interactions of factors of demand and supply of the courses.
B: Price Elasticity of Supply
Price elasticity of supply refers to the responsiveness of supply to the levels of prices of goods. Elasticity is represented in numerical form and is it the percentage change in the quantity supplied divided by the percentage change in price of the goods in consideration. The higher the elasticity, the more the price has an impact on the quantity suppled. If the coefficient is less than one, the supply elasticity is termed as inelastic and a coefficient of more than one is termed as elastic price elasticity of supply. If the price elasticity of supply is zero, it shows that the quantity supplied is not responsive to the changes in price.
C: Supply Graph
The graph has a positive slope showing the positive relationship between quantity of goods supplied and the price. The higher the price of the goods, the higher the quantity of supply as supplies expects an increase in profits realized form increased sales.
Section 3: Recommendations:
Lastly, the numbers of students willing to pursue medicine do have a direct impact on the availability of courses offered at various institutions of higher learning. Most institutions often carry out their background surveys to determine which courses have had an increase in demands. The managements of such systems often responds to such increased demands by doubling student intakes to such courses, increasing labor within the respective departments and expanding infrastructure to accommodate soaring number of learners. My niece would be advised that the presence of several institutions offering a similar course, probably do so in response to changing and growing educational needs from the people living in certain areas.
Reference
Borucke, M., Moore, D., Cranston, G., Gracey, K., Iha, K., Larson, J., ... & Galli, A. (2013). Accounting for demand and supply of the biosphere's regenerative capacity: The National Footprint Accounts’ underlying methodology and framework. Ecological Indicators, 24, 518-533.
Brunner, K., & Meltzer, A. H. (1964). Some further investigations of demand and supply function for money. The Journal of Finance, 19(2), 240-283.
Milner, J., & Holston, B. (2015). Building the supply and demand for evidence in the Every Student Succeeds Act.
Petroff, J. (2013). Demand and Supply.
Sraffa, P. (1926). The laws of returns under competitive conditions. The Economic Journal, 36(144), 535-550.
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