Economics of Agglomeration Cities and Industrial

Question: Discuss about the Economics of Agglomeration for Cities and Industrial. Answer: Introduction: The demand and supply of an economy are considered as the backbone of the market. It is the basic yet important concept of economics. According to Tietenberg and Lewis (2016), demand is the total amount of goods and services that the consumers are willing to buy at a certain price level. The supply, on the other hand, is the total amount of goods and services the sellers are willing to sell at a particular price level. For a market or economy to be stable, it is important that there is equilibrium in the market economy. In the equilibrium condition, the amount of demand for goods and services meets the amount of supply of goods and services. The equilibrium position helps the market to determine the price of the product and quantity of the product offered to the market. The essay focuses on demand and supply of goods and the factors that affect the demand and supply sides of the market. From the article of demand and supply Petroff (2013) the law of demand, the rise in the price level of goods will decrease the demand for the goods and vice versa. The law of supply states the total amount of quantity that is supplied to the market at a given price level. The law of demand further is determined by the diminishing marginal utility, substitution effect, income effect and the indifference curve. The supermarkets in Australia experiences challenge in meeting the market demand for bakery products. The demand curve for bakery goods indicates the total number of bakery goods that the individuals in Australia are willing to consume at a particular price level. The curve is downward slopping as the demand level decreases with the increase in price. The supply curve, on the other hand, refers to a number of bakery goods that the sellers are willing to sell at a particular price level. The supply curve is upward slopping as with the rise in the price level, the propensity of sellers to sell the goods increases, which leads to higher supply (refer to appendix figure 1). The bakers are facing increased problems due to the fall in the price level for the product. As there is a decrease in the price level, the bakery processors in Australia intends to bring down the price level, they were willing to pay to the suppliers of raw materials. In order to deal with the situation, there was campaign held in the economy so that the consumers could be encouraged to purchase more bakery products such as bread, baked fruits, and other products. Such activities would help to support the bakers of Australia. The economic growth rate of Australia and the domestic policies further faced notable changes. These changes affected the demand for bakery products in the economy. Soderbery (2015) further mentioned that the demand for foods is highly influenced by the food safety and other concerns of the consumers regarding chemicals; adulteration used while producing. As the concern for food safety on behalf of the consumers has been increasing, it is important for the government of Australia to pay attention towards the importing of agricultural products and the manufacturing process. It is important to improve the productivity and the competitiveness in the international market, the producers of bakery goods in Australia needs to reach the export target set by the government. There will be an increased pressure in the food system and demand for bakery products because of the rise in per capita consumption. Moreover, there will be an impact in the prototypes of food consumption and demand as a result of the aging population. Thus, there will be an increase in the demand for imported food products in Australia. In addition to the price level, the taste, and preference of the consumers, the behaviour and income pattern also affect the demand for goods and services. In the case of demand for food products, the taste and preference are one of the important factors that affect the demand to a great extent. In addition, the opinion of Fujita and Thisse (2013) states that the demand for food products increases when it tastes better than other food products. The demand curve for such product lies at a higher level. The change in the fashion results in the change in demand for goods and services. The income level of individuals also plays a vital role in affecting the demand. When the income level raises the demand for goods and services also rises. If the price is lower than usual, income is unconventional which allows the customer to buy more. An unexpected price increase would cause the consumer to buy less. Greater income level infers that the purchasing powers of individuals are high. Thus, co nsumers are capable of affording more products due to which the demand level increases. In the case of normal good, there will be an increase in the demand if the income of individuals increases. On the contradictory, an increase in the income level will lead to a fall in demand for goods, if it is an inferior good (Rios, McConnell and Brue 2013). To calculate the market demand for a given good, the demand for the individuals at various price levels is added together. The supply of goods and services is affected by a number of factors such as the policies of the government, technology, and the transport condition. One of the main factors for determining the supply of goods is technology. When an economy has better technology and options, there is an increase in the production level of goods. This further leads to increase in the supply of goods and services. On the other hand, if the government of the economy incurs tax on the goods, the supply level falls down. The cost of production increases as the increase in tax level is increased (Wood 2014). The transport further acts as a factor while determining the supply of goods. If the raw materials are not available at the specified place and time due to lack of proper transport system, the production level falls along with the fall in the supply level (refer to appendix 2). From the above essay, it can be inferred that the population of Australia favours suitable, safe and processed foods that increase the demand for such type of foods. In the current economy of Australia, there is a trade surplus in food and beverage sector. Moreover, the demand and supply of goods are highly dependent on a number of factors such as taste, preference, behaviour, income, technology, policies of government and others. References Fujita, M. and Thisse, J.F., 2013.Economics of agglomeration: cities, industrial location, and globalization. Cambridge university press. Petroff, J., 2013. Demand and Supply. [Accessed from https://www.saylor.org/site/wp-content/uploads/2012/06/Chapter-3-Demand-and-Supply.pdf] Rios, M.C., McConnell, C.R. and Brue, S.L., 2013.Economics: Principles, problems, and policies. McGraw-Hill. Soderbery, A., 2015. Estimating import supply and demand elasticities: Analysis and implications.Journal of International Economics,96(1), pp.1-17. Tietenberg, T.H. and Lewis, L., 2016.Environmental and natural resource economics. Routledge. Wood, J., 2014. Supply and demand.Construction Journal, p.7.