Economics in Context Essay Example | Topics and Well Written Essays - 750 words

Economics in Context - Essay Example on that point is an overall growth in the price and quantity.if the price of a complementary good increases then the inquire for the good will fall. This will result in a leftward shift in the demand curve of any complementary good(Biz/ed team 2010, Spotlight on the theory Demand Curve, Movements) covenant to follow fair trade policies has resulted in increased cost of production, thereby causing a decrease in hand over as producers shift to some other activities. This translates into a higher quantity at a lower price.The elasticity of demand price is becoming more inelastic for tea. This can be explained by the fact that rising tea prices have not deterred tea demand and have been accompanied by increased tea demand. Tea is a changeless drink in the diets of many and is catching on in many countries like China and it has relatively few alternatives (only real one being coffee) which makes the demand inelastic. Another reason for the inelast ic demand is that tea consumes a low percentage of the consumers income making them less sensitive to its price changes.(Price of Tea, Economics Help). This seems tall(a) but an exception might exist for consumers who treat teas as a luxury, their demand would be price-elastic.The elasticity of supply price would tend to be inelastic. This is because although an increase in price should create more incentive for suppliers statistics show that this has not happened at least in the short run. At the moment for example supply is being outstripped by demand. Also irrigation, weather conditions and land shortages make it hard to increase tea production.( Rahman Lutfur Mohammad Imapct of price and other factors on tea in Bangladesh Sources of revolution and Disparity over Vision) In the long run however supply is likely to respond to the tea pressure. It has been estimated by the FAO that supply will