Essay Example on Understanding Demand in Business: Impact of Price and Quantity Demanded

In business, one should be able to understand demand. This enables the businessmen to determine the amount of goods to bring to the market. This is because demand means the willingness of consumers to purchase products or services on the market regardless of the prices stipulated. On the other hand, the law of demand illustrates how inversely varying are the price and quantity demanded. Also, the amount required shows how willing the consumers can buy a certain amount concerning the price provided on the market at a particular time. Therefore, it is integral for entrepreneurs to study the behaviors of the consumers on the market. This helps in understanding the way the curves on the graphs are moving hence getting to comprehend if to add on the price or reduce, for instance, in Change in Quantity Demanded or add the commodities on the market or reduce.

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In the past days, oil prices have been fluctuating on the market, more so, in this Corona Virus Disease 2019. The pandemic has dramatically impacted the world's economy, with each country counting in the decline of the economy. This means that almost every sector is affected by the COVID-19 crisis. Energy, in particular, oil, has also had a negative impact. In modus operandi, fuel offers job opportunities to a considerable number of people. They are starting from mining, refining, transportation, and even selling the end products. The pandemic resulted in several employers losing jobs because of decongestion and maintain social distance as one way of mitigating the spread of the disease.

In Houston, the situation is the same. More than 300,000 people lost their jobs from the oil market due to the pandemic. Apart from losing jobs, the prices of oil have also declined. In the United States, the price of crude oil depreciated $30 bellow zero. In this incidence, graph B can well describe the scenario. Seemingly, due to the pandemic, the number of people traveling have reduced. It is advised that individuals stay at home as a measure to mitigate the spread of the coronavirus. This shows that the transport sector is affected. The plane travels were banned in the majority of countries allowing only those transporting cargoes to fly. This indicates how the consumption of oil reduced in graph B When one or more of the determinants of demand change such that the demand for that sound decreases. The curve reflects this by going downwards. This indicates that consumers won’t pay highly; instead, they are willing to pay less for the commodity. This results in a decrease in the price of the goods. Same to the case, the price of crude oil reduced because of the willingness of the consumers to purchase it with less payment. This follows the current factor of the Coronavirus pandemic.

However, graph C can also be applicable in the scenario. This is because, according to curve C, When one or more of the determinants of supply change such that the supply for that good increases, the supply curve shifts outward, showing that suppliers can bring more products to market at lower prices for all possible quantities. However, this causes a decrease in rate. The manufacturing of oil has not stopped. There is still the manufacturing of oil taking place. According to graph C, since there are fewer consumers on the market, the availability increases, leading to a decrease in the price.

Elsewhere, in India, after the announcement of the country's lockdown, the fuel sector recoded a considerable loss. Among the companies affected were India Oil Corp (IOC). The oil price reduced drastically immediately after the Prime Minister, Narendra Modi, announced the lockdown in the measure to mitigate the spread of the Corona Virus in the country. This means that factories, offices, and even roads reduced functioning with some shutting down amid the containment measures. Therefore, the demand for fuel on the market reduced hence affecting the supply. According to the sources, it was indicated that the need for petroleum products dropped by 46 percent in April. In this scenario, Graph Dwell elaborates. According to graph D, When one or more of the determinants of supply change such that the supply for that sound decreases, the supply curve shifts inward, showing the suppliers can bring fewer products to market at higher prices for all possible quantities. This results in the reduction of the price. This is evidenced where companies in India were lamenting over the decreased demand for petroleum, which resulted in the depreciation of the prices, costing the companies to count on losses. However, the government relaxed some of the measures in May against combating the spread of the Corona Virus. Remarkably, the companies dealing with oil started to increase the availability of fuel in the market due to the demand. At the same time, the prices were raised. In this place, graph A best explains the change. According to graph A, when one or more of the determinants of demand change such that the demand for a reasonable increase, that shows that consumers are willing to pay more for all possible quantities of the good. The upward shift in the demand curve causes an increase in price.

References

https://m.economictimes.com/industry/energy/oil-gas/indian-oil-corp-says-unlock-1-0-to-revive-fuel-sales-soon/articleshow/76242080.cms

https://www.nytimes.com/2020/04/27/us/coronavirus-houston-texas-oil.html