demand curve

demand curve

Introduction

Economics is a broad field of study which encompasses a variety of terms, theories, and concepts. There is one thing that every economist and non-economist is aware of in the world. This is the concept of the demand curve. A demand curve in economics is the graphical or diagrammatic representation of how the market reacts to specific movements. When the demand goes up, then the prices are also likely to go up, and when it goes down, then the costs decrease. This is one of the main points under discussion in the Podcast. The speaker indicates that they had not yet brought to life the concept of the demand curve until they interacted with Uber (Dubner, 2016). He cites that this interaction opened up his eyes to the massive benefits that the demand curve has to suppliers, consumers, and even economists themselves.

Summary

The entire article is a discussion of the demand curve with an occasional branching out into some of its other elements. The speaker notes that it is not that the concept of the demand curve was untruthful in the beginning. It is just that it had not come to life. The demand curve is what helps people understand the concept of the consumer surplus. It is also the one that allows the supplier or the service provider to protect their gains from the business activity. The article also discusses the steps that Uber is taking towards an innovative future. It discusses the movement to self-driving vehicles, which in itself is automation. Because of such, there is likely to be a massive change in the economics of the entire Uber element. There are likely to be lower prices as consumers do not have to pay a driver. This once again brings back the concept of having a huge consumer surplus, which is a good thing for the overall economy.

Analysis

This section will mainly focus on the demand curve. As earlier mentioned, the demand curve is a representation of the relationship between the price of commodities and the quantity demanded. Since time immemorial, the concept has always revolved around decreasing demand as prices go up and increasing demand as prices go down. This is so except for various individual cases which may take the opposite road. The speaker in the Podcast argues that this is relevant for the Uber case where the quantity demanded tends to go down as there are increases in price. Whether this is true will be subject to critique in the next section of this paper. However, on the issue of consumer surplus, Uber is a company that fits in well here. The consumer surplus is the amount of money which the consumer was willing to spend on a particular good or service, but it was more than the cost of products and services. For instance, if a person had traveled in an Uber when the demand was high, they paid a higher price. Therefore, it is natural that the next time the same individual wants to use an Uber, they will have in their pockets around the same money that they had last time. The twist comes in then when they travel during a time when there is low demand. When they order for the cab, they will immediately realize that it is much cheaper and therefore end up with a consumer surplus. Consumer surplus enables individuals to have some extra money, which they will at one point plug into the economy, contributing to more growth. Additionally, the excess is useful for the business itself. Consumers who get a surplus will buy back from the company the next time so that they remain with some money in their pockets.

Critical Evaluation

            From a personal perspective, some facts are agreeable in the Podcast, while others should be subject to discussion and further examination by economics. One of these is the statement that the demand curve was not alive before the speaker understood the Uber way of business. The demand curve has always been alive even before the first economist gave it a name.

A straightforward example is the prices of corn, which have been a significant component of the diet for a long time. Whenever they go up, maybe due to a problem in supply, the consumers tend to demand less. They will look for substitute products until there is a resolution of the issue. Therefore, the demand curve is something that comes alive from the instincts of human beings who will usually prefer the option where they can derive maximum benefits at lower costs. It is, therefore, essential to consider all the demand behaviors of individuals when faced with a surplus and when they are faced with a shortage. It is also imperative to understand that not all other factors remain constant when the quantity demanded goes high, and there is a price increase. Sometimes, people will need to use Uber whether the prices are high or not according to their specific needs. Thus, a consideration of these would be necessary for a discussion revolving around the demand curve.

Conclusion

The demand curve and the concept of the consumer surplus are quite exciting fields in the world of economics. They help the consumer understand the patterns in the market which they can utilize for the derivation of maximum utility from the various goods and services. However, the analysis of these fields should not blind economics to the fact that there exist different types of demand. Thus, when analyzing individual industries, products, or services, all considerations of economics must be taken into account.