What makes market demand fall?

Demand is defined as the quantities of a product that purchasers are willing and able to buy at various prices per period of time, ceteris peribus. Whereas, supply refers to the quantities of a product that suppliers are willing and able to supply at various prices per period of time, other things again remaining constant. In every single market, for instance, market for apples, oranges, ladies handbags and etc, there must be demand and supply. In the article, the sales of apple in the UK is said to be declining, why is it so? How did it happen?

First and foremost, it’s very important to know what does the Law of Demand state. It states that all other things remain unchanged; more of a good will be demanded at a lower price. Therefore, a change in price actually affects the quantity demanded of a good. Next, what causes a shift in the demand curve? When the demand curve in a market shifts, there is either and increase or decrease in demand. There are few determinants that cause the demand curve to shift, consumer preference, prices of related goods, income and the others.

In the diagram above, different shifts of the demand curve, D is illustrated. From D to D₁, demand curve shifts to the left; there is a decrease in demand. On the other hand, demand curve shifts from D to D₂, an increase in demand causes the curve to shift leftward. As mentioned, there are few factors that can affect the demand of one good and these concepts can be applied to the apple market, which faces a fall in demand recently, based on the article I read.

In the apple market, it’s said that consumption has fallen 3.2 per cent last year to 501million kilos, or 1,104million pounds (Poulter, 2009). People question, why? Other than what has been mentioned in the article, consumers are eating less healthily nowadays, the fall in consumption may be caused by the expected future price. While making decision to buy or not to buy, people make assumptions and predictions. The current situation in the apple market that there is excess of supply makes everyone think that the price of apple is going to be lower in the future, in other words, it will continue falling. Hence, with the thought of having cheaper apples in the future, consumers choose to purchase afterwards, not now. It thus leads to a fall in demand for apple for current period.

Next, the advancement of technology has caused really great improvement in the production other healthy product. People no longer need to consume fruits like apple to maintain health or absorb the nutrient that they need. Other healthier and more convenient products that carry the same or better effect are all over the market. For instance, people can just drink a bottle of yogurt or apple juice to get the nutrients that an apple contains. People would rather choose to consume these kind of goods compared to an apple which has to be peeled off as it saves time, and is less troublesome. In short, the improvement of healthy products has slowly replaced the traditional way of being healthy which is by eating fruits. So, demand for apple is decreasing.

Other than those are stated in the article, there may be some other reasons that cause the fall in demand of apples. The prices of related goods can actually affect the demand of one good whereby the related goods are its substitute and complementary good. Substitute goods are goods that can be used in place of another good. In this case, substitutions of apples would be oranges, plums and other fruits. Whereas, complementary goods are the goods that are used in conjunction with another good. In this case, flour is used simultaneously with apple when people are to bake apple pies; flour is a complementary good to apple. A reduction in the price of its substitute goods leads to a fall in demand of apples. In addition, increase in price of the complementary goods will reduce the consumption of apples.

Nevertheless, factors like income of the consumers definitely cause a shift in the demand curve in the apple market. Apple, being a normal good, will be bought when consumers’ incomes rise. However, supportive data shows that private sector wages fell by 1.9 per cent – a fall driven by thousands of City workers not receiving a bonus in the year 2009 (Wallop, 2009). As a result, demand of apples falls just because of the decline in income of people, when it is known as a normal good. Yet, there may be exception too because for some people with higher incomes, apple is inferior good. If that is the case, then this reason may not be valid.

Instead of just figuring out the root of this issue, the UK government should actually do something to boost the demand of apple. In other words, government intervention is needed in this field. Firstly, government can provide subsidies to the apple planters. By providing better equipment and facilities like better fertilizers, soil and etc., better quality of apples can be produced and hence, consumers will again have the confidence in apples, consumption is very likely to increase again. Other than providing better tools, government should also take the initiative to hold a campaign to send a message to the public regarding the benefits of consuming apples.

In a nutshell, the causes of a fall in demand of apples are actually the general guidelines for the UK government to do something about the situation. By considering all the economic and scientific factors, the authority like Apple and Pear Association should figure out a way to boost the demand of apples, as suggested. However, other factors have to be considered to determine its successfulness. For instance, the elasticity of demand of apple, the elasticity of supply and etc. need to be very well and carefully considered before making any decision that may affect the economy of the entire country.

Original article link: http://www.dailymail.co.uk/news/article-1215030/Apples-losing-crunch-nation-abandons-fruit-favour-sweets-junk-food.html

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