Fashionomics

A blog about fashion and economics

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Law of Supply

A microeconomics law stating that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services offered by suppliers increases and vice versa.

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Supply

A fundamental economic concept that describes the total amount of a specific good or service that is available to consumers.

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Examples of Substitute Goods

Cap’n Crunch & Koko-Krunch

Coffee & tea

Chanel & Prada

Margarine & butter

Pepsi & Coke

Mercedes & Mazda

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Substitute Goods

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Preference: A Non-Price Determinant

Some people have strong preferences.

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Complementary Goods

A complementary good is interrelated with another good or service that is demanded. For instance, a Juicy charm is complementary to a Juicy bracelet. If the price of the Juicy bracelet increases and reduces demand, it may reduce the demand of the Juicy charm. 

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Non-Price Determinants in Demand

Non-price determinants are all other determinants other than price such as:

Income: People with larger incomes will demand certain things in contrast to people with low incomes. 

Tastes/preferences: People like different things so that will affect the demand of a good or service. 

Market size: If the market is expanding rapidly, customers may be compelled to purchase based on other factors than price, simply because the supply of goods is not keeping up with demand.

Climate: The need for goods varies by time of year; thus, there is a strong demand for lawn mowers in the Spring, but not in the Fall.

Advertising: Sellers can use advertising, product differentiation, product quality, customer service, and so forth to create such strong brand images that buyers have a strong preference for their goods.

Population and demographics: A change in the proportions of the population in different age ranges can alter demand in favor of those groups increasing in size (and vice versa). More old people might result in a bigger demand for medicines while more people might result in a bigger demand for teen-style clothes.

Complementary goods: If there is a price change in a complementary item, it can impact the demand for a product. For instance, a change in the price of laptops in a movie theatre could impact the demand for laptop accessories. 

Future expectations: If buyers believe that the market will change in the future, such as may happen with an anticipated constriction of supplies, this may alter their purchasing behavior now. Thus, an expected constriction in the supply of fur animals might increase the demand for fur coats now.

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The Demand Schedule

Demand schedule is a table or listing which contains values for the price of a good and the quantity of units of a single type of good that would be demanded by potential buyers at that price. If the data from the table is charted, it is known as a demand curve. 

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Contraction in Demand

When quantity demanded of a commodity decreases as a result of price increase, it is called contraction in demand (a movement up the demand curve).

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Movement Along the Demand Curve

A shift in the demand curve is caused by a factor affecting demand other than a change in price. If any of these factors change then the amount consumers wish to purchase changes whatever the price. The shift in the demand curve is referred to as an increase or decrease in demand. A movement along the demand curve occurs when there is a change in price. This may occur because of a change in supply conditions.

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Cateris Paribus

In economics and finance, the term 'cateris paribus' is used as a shorthand for indicating the effect of one economic variable on another, holding constant all other variables that may affect the second variable.

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The Demand Schedule

In economics, the demand schedule is a table of the quantity demanded of a good at different price levels. Thus, given the price level, it is easy to determine the expected quantity demanded.

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Demand Function Equation

Qd=a - b (p)

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Law of Demand

The law of demand states that there is a direct relationship between the price of a good and the demand for it. In particular, people generally buy more of a good when the price is low and less of it when the price is high.

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Demand theory is a theory relating to the relationship between consumer demand for goods and services and their prices. Demand theory forms the basis for the demand curve, that relates consumer desire to the amount of goods available. As more of a good or service is available, demand drops and therefore so does the equilibrium price.

In the fashion market, the demand is for clothes, shoes and other accessories. 

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Expansion in Demand

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When quantity demanded of a commodity increases as a result of price reduction, it is called expansion (or extension in demand (a movement down the demand curve)

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What is a Market?

A market is any place where the sellers of a particular good or service can meet with the buyers of that goods and service where there is a potential for a transaction to take place. The buyers must have something they can offer in exchange for there to be a potential transaction.