The response to demand of computer and potato chips

The supply’s response to demand is always a direct response. Suppliers of any commodity respond to a rise in demand by increasing their supply levels to meet the demand. The direct response stops at the point of equilibrium.

The response to demand of potato and computer chips may differ both in the short run and long-run. The potato chips response will be faster in supply increase because the time needed in adjusting its production is shorter compared to the computer chips. On other hand, computer chips response in supply increase will be slower because adjustments to production require more time in cost adjustments. However, the response of both products to a rise in demand will be limited to changes in variable costs. Though as time goes by all costs can be adjusted to increase supply for both goods. Therefore, its’ conclusive to say potato chips response is quicker in the short term because its production cost variables take less time to change compared to computer chips.

According to Andreu, Michael and Jerry (1995 in order to increase production in the short run each manufacturer has only one option, which is to change the variable costs that are easily adjustable.

In the long run supply response will reach an equilibrium point with no shift for the potatoes because they are regularly consumed. However, a shift is possible if potatoes go out of season and thus, affecting supply. The computer chips supply equilibrium will have a shift on its equilibrium as the market gets saturated and demand starts to drop.

Price elasticity of demand (PED).
Price elasticity in demand is the quantitative response in increase or decrease of a good/service in response to a certain change in price. The change in quantity is related to a one percent change in price while other determining factors remain