Consumer Income and Demand for Tea
Demand refers to a situation where the customer has the desire to purchase a particular good or service with the prevailing prices in the market which has an indirect relationship with the price (Farm, 2020). On the contrary, supply refers to the total amount of goods and services available for the customer in the market where has a direct relationship with the price.
The factors that are responsible for the change in demand for Tea are as follows:
Tea is one of the necessities for every individual in their life which is a normal good. Thus, keeping the supply constant, as the income of the individual increases, the demand for tea also increases and vice-versa (Guan et al., 2020). There is a direct relationship between the consumer’s income and the demand for tea.
As the price of the substitute increases, the demand for tea also keeps on increasing and vice-versa. For example, Coffee and Tea are substitute products. So, as the price of coffee increases, demand for tea automatically increases. This is because they are substitute goods and people will shift to the substitute if the price of the product increase (Guan et al., 2020). Thus, the price of substitutes and demand for tea has a direct relationship with each other.
The price of Tea has an indirect relationship with the demand of the product. Thus, as the price of tea rises, keeping the supply of the product constant, the demand for tea automatically decreases and vice-versa.
The demand for the tea increases as there are more customers in the market and vice-versa keeping the supply and other factors constant. Thus, the demand for tea has a direct relationship with the number of customers in the market.
Consumer tastes and preferences have a direct relationship with the demand for the product (Guan et al., 2020). If the consumer has a liking towards that particular product, then the demand for the product will automatically rise and vice-versa.
The factors that are responsible for the change in the supply of Tea are as follows:
The price of the product is directly related to its supply. Thus, as the price of the product increases, the supply also increases and vice-versa (Govindan & Hasanagic, 2018).
The amount of supply of the product decreases as the cost of production increases and vice-versa. Thus the supply of the product is indirectly related to the cost of production.
The price of related goods has an indirect relationship with the supply of the product. For example, if the price of coffee increases manufacturers start producing more coffee and the supply of tea automatically decreases (Govindan & Hasanagic, 2018).
The equilibrium price refers to a situation where the demand and supply meet each other. The equilibrium price increase and decreases according to the changes in the demand and supply of the product (Zhang & Wang, 2018). As the consumer’s income increases the demand for the product will also increase which will lead to an increase in the equilibrium price of the product. Similarly, the equilibrium price keeps increasing in case of the increase in the number of customers, price of substitutes, consumer taste, and preferences as they have a direct relationship with the demand of the product. On the contrary, the equilibrium price will decrease if there is an increase in the price of tea (Rouskas, 2021). This is a situation where the customers will shift to the substitute product as the price is lower over there.
On the other hand, if the supply increases keeping the demand constant, this is a situation of excess supply. Thus, the equilibrium price will decrease in the market.
Since, tea is one of the goods that fall under the necessities of the individuals in the society, the demand for tea will keep on increasing in the near future. Individuals nowadays have become more health-conscious and have green tea these days (Pinho, Resende & Soares, 2018). Thus, it is expected that the demand for tea will increase in the near future as this is a necessity for individuals.
Conclusion
Thus, it can be concluded from the above analysis that the demand and supply of the product are based on several elements of the market. This ultimately results in the change in the equilibrium price of the product keeping other factors constant.
References
Farm, A. (2020). Labor demand and product demand. Journal of Post Keynesian Economics, 43(4), 634-639. https://doi.org/10.1080/01603477.2020.1794905
Govindan, K., & Hasanagic, M. (2018). A systematic review on drivers, barriers, and practices towards circular economy: a supply chain perspective. International Journal of Production Research, 56(1-2), 278-311. https://doi.org/10.1080/00207543.2017.1402141
Guan, Z., Zhang, X., Zhou, M., & Dan, Y. (2020). Demand information sharing in competing supply chains with manufacturer-provided service. International Journal of Production Economics, 220, 107450. https://doi.org/10.1016/j.ijpe.2019.07.023
Pinho, J., Resende, J., & Soares, I. (2018). Capacity investment in electricity markets under supply and demand uncertainty. Energy, 150, 1006-1017. https://doi.org/10.1016/j.energy.2018.02.029
Rouskas, E. (2021). Equilibrium price dispersion with search regret disutility. Studies in Microeconomics, 9(1), 11-27. https://doi.org/10.1177/2321022219887552
Zhang, T., & Wang, X. (2018). The impact of fairness concern on the three-party supply chain coordination. Industrial Marketing Management, 73, 99-115. https://doi.org/10.1016/j.indmarman.2018.02.001
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