There are many factors indicating that an economy is a growing one. They include the GDP, interest rates, inflation rates, rates of employment and unemployment, among others. This paper will focus on the interest and inflation rates, the impact of prices on a product, and the notion of demand and supply in the purchase of a product.
Interest rates are the rates that determine the amount of extra money one must pay when repaying the loan. They are represented as an annual percentage of the unpaid loan. In fact, high interest rates make the prices of goods and services expensive. As a result, it may deter consumers from paying money on such goods. Thus, when interest rates are high, consumers may opt to postpone the purchase of items which they may view as being luxurious until favorable credit terms are available.
According to Foster, inflation rate refers to the increase in the prices of goods and services. It is calculated by measuring the costs of the products and services like transportation, electronics, and medical care, among others. Inflation affects other factors such as job growth, which can, in turn, decrease the GDP and the employment rates. Talking about fair inflation, it should be in line with the changes in the average consumers income. Moderate inflation levels have some benefits to the economy like encouraging spending and saving which are crucial to the growth of an economy. Inflation also keeps interest rates at a high level which motivates people to invest their capital and provide loans to entrepreneurs and small businesses.
Effect of Economy on Demand and Supply
The economy has affected the demand for the iPhone smartphone in the last two years. The demand for the smartphones has been high for the previous two decades. With regard to interest and inflation rates of the iPhone, they have been slowing in the last two decades. Thus, they have determined the level of the customers spending on the phones. Many customers have been buying the iPhone since the interest and inflation rates were low. For the two years, the demand for the iPhone has been very high, leading to a shortage in supply.
Impact on Supply and Demand for the Product
Supply refers to the amount of goods that a nation can produce, whereas demand is the amount of goods that the buyers are willing to buy at a particular time and place. When the demand for iPhone is high, the prices increase due to low supply. In the last two years, the demand for iPhone has been high. Due to that, iPhone smartphones have been in short supply. Therefore, the demand has been exceeding its supply. The demand for iPhone smartphones will always increase the gross domestic product of a nation because people are willing to spend money on the purchase of this device. As a result, iPhones supply deficit caused an increase in prices and low demand. When consumers do not spend their money on certain goods, then the gross domestic product of a nation falls.
Impact on the Price of the Product
According to Tate et al. (2015), all consumer choices are influenced by prices. Consequently, when the prices are high, the demand is low. The prices of the iPhone were very high because they had a lot of demand. However, the price of the smartphone did not deter me from making a purchase.
Application of Demand and Supply
Consumers are very sensitive when it concerns the price of an individual product. If the price of iPhone smartphones rises, and a buyer is conscious about the relevant information, the result will be low demand for the product as consumers will not make purchases. On the contrary, if the price decreases, the demand will increase, and many customers will purchase iPhone smartphones. The price of the smartphones will continue varying until the quantity demanded by the buyers will be equal to the quantity of devices supplied by the manufacturers. The result will be equilibrium of the price and quantity.
Macroeconomics Concepts and Shifts in Supply and Demand
The concepts in macroeconomics include factors such as the rate of employment, GDP, inflation rates, and unemployment, among others. Factors that affect shifts in demand and supply include the prices of related goods and services. For instance, in the case of inflation rates, when the prices are high and customers have less money to spend, the purchases decrease, thereby impacting on the demand for the goods and services. If the rates of unemployment are high, customers will not have enough money to spend on purchase of expensive goods, which will affect the price, demand and supply of the product.
Economic indicators that reflect the strength of an economy include interest rates, inflation rates, and GDP, among others. Such factors in line with the price have an impact on the demand and supply of a product. Consumers are price-sensitive, and thus the entrepreneurs should consider the aspect of pricing if they want to increase their annual sales.