Reason that causes affect on the demand

September 24, 2017 Engineering

First, as stated in the article, because of the entire figure of consumer is world-wide, therefore impacting the demand of palm oil globally. Although the demand is increasing over clip, manufacturers are still unable to run into the demand required in the market. Manufacturers are faced with challenges from the nature and work force. However, due to the addition in consumer, demand of palm oil finally increased excessively, ensuing a displacement in the demand curve to the right side.

Monetary value of Palm Oil ( per metric ton )

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Calciferol: Demand

Second: Supply

Phosphorus: Monetary value

Quantity ( 1000000s of metric tons )

Q

Q1

P1

Second

0

Phosphorus

D1

Calciferol

Another back uping factor that affects the demand of palm oil is the outlook of the future monetary value to alter. From the article, it tells us that the monetary value of the rough thenar oil ( CPO ) is tend to increase due to the deficit of work force and cuts in fertilisers, therefore consumers will purchase more palm oil to stock up before the increased of monetary value. In other words, the addition of palm oil demand will do the demand curve to switch to the right side.

The 3rd factor is utility good. Given that the replacement good for palm oil in the article is soy oil but has a dearer monetary value compared to handle oil during winter clip. Hence, when the monetary value of soy oil additions, of course the demand of soy oil will diminish harmonizing to the theory of demand. Thus, doing consumers turning to jump good, in this instance the thenar oil. Other than that, because of this, demand of palm oil has increased once more and once more ensuing the demand remedy to switch rightwards once more.

Reasons that causes affect on supply

First and first, one of the most obvious factor is engineering. From the article, it says that Malaysia which is one of the biggest providers or palm oil is confronting a down sloping in its production because of slow replanting and unsatisfactory output. If new engineering is non imported into the industry, this will go on to deteriorate and coercing supply of palm oil to diminish. From what we can see, the supply curve in the graph is will switch to leftwards.

D = Demand

S= Supply

P=Price

Quantity ( 1000000s of metric ton )

Monetary value of thenar oil

S1

Second

P1

Phosphorus

Calciferol

Q

Q1

0

The 2nd factor that affects the demand of palm oil is the efficiency of production. Obstacles such as fertiliser cut, labour deficit and scarce resources, for illustration land and H2O will impact the supply of palm oil. This causes lower efficiency in production of palm oil and diminishing the production of palm oil, therefore, conveying the supply swerve a crap to the left.

In short, harmonizing to the article, the alterations in the demand side is more critical and have contributed more to the current alterations in palm oil market.

Question 2

Measure

D = Demand

S= Supply

P=Price

Monetary value of thenar oil

( per metric ton )

Factors which causes a alteration in the demand for palm oil but do non do a displacement in the supply curve are the first and 3rd factor as stated above.

Second

D1

P1

Calciferol

Phosphorus

0

Q

Q1

In this instance, when the demand increases, a deficit is resulted at the monetary value equilibrium, P in the graph. In order to acquire rid of the deficit, a new monetary value is given to the merchandise. A new monetary value will ensue in a new equilibrium, P1, besides at the same clip increasing the measure supplied to Q1. Because there is a merely an addition in the supply, no displacements are required.

Factors which changes the planetary supply indicates that the supply curve displacements leftward and no alterations to the demand curve.

Q

Q1

Phosphorus

0

P1

Measure

D = Demand

S= Supply

P=Price

Monetary value of thenar oil

( per metric ton )

S1

Second

Calciferol

From the graph, it illustrates that when there is a diminution in supply, a deficit will take topographic point in the equilibrium point, P. in order to acquire rid of the deficit, the monetary value per metric ton have to be increased. Hence, there will be a new monetary value equilibrium, P1, accordingly the figure of measure supplied will drop from Q to Q1. Even though the measure demanded has decreased, the demand curve still remains the same.

Question 3

The first factor is permutation. Merely a few replacements is prone to be seen in the market other than palm oil such as soy oil or vegetable oil. In other words, replacement in the market for palm oil is non really tight, therefore the demand for biodiesel is said to be inelastic.

Another factor is the clip elapsed since the monetary value alteration. In the industry, manufacturers merely concentrate in short tally and non long tally. In other words, the monetary value snap is inelastic demand.

In short, the monetary value snap of demand of palm oil is said to be inelastic.

Price ( per metric ton )

TR

0

TR 1

Phosphorus

P1

Entire Gross

Measure

Inelastic

Measure

Unit Elastic

Elastic

0

When monetary value snap of demand is inelastic, an addition in the palm oil monetary value will increase the entire gross. When the demand is unit snap, at P1, the entire gross is at the upper limit. Therefore, it shows the market is efficient.

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