Demand and supply factor affecting revenue

The degree to which demand or supply reacts to a change in price is called elasticity.

Demand and supply factor affecting revenue

Because of the importance of oil supplies, fluctuation of oil prices can have a great effect on the global economy. The standard economic principle of supply and demand, based around the concept that the price of a product is directly related to relationship of supply related to consumer demand, applies to global oil prices and the resulting effects on worldwide economics.

Increased Oil Consumption As the world's population grows, global oil demand increases accordingly. According to the U.

Law of Supply and Demand: Basic Economics

Energy Information Administration's statistics, the U. Oil demand is highest in developed countries, with China, Japan and India trailing the U. Oil Reserves The ability to supply oil for world demand affects the ultimate price of the product. The world's supply of oil centers around the capacity of reserves.

Reflected as the available supply, oil reserves are most often expressed in terms of "proven reserves. The potential of proven reserves can be increased through technological advances and further exploration of supply locations, as well as economic conditions that favor oil production.

Demand and supply factor affecting revenue

Video of the Day Brought to you by Techwalla Brought to you by Techwalla Exchange Rates World exchange rates directly affect the worldwide price of oil in terms of how the cost is reflected in national markets. The declining value of the U.

When oil prices increase, Americans must pay even more U. In cases of appreciation, such as when the euro strengthened in value, increased oil prices can be canceled out by a more valuable form of money. Environmental Factors The environment can have a strong effect on the global price of oil, in terms of drastically changing the ability to produce oil supplies.

For example, ina number of devastating hurricanes hit off the southeast coast of the U.

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These hurricanes damaged oil supply facilities and reduced the flow of crude oil supplies to the U. Applying the economic principle of supply and demand, the decrease in oil production could not meet with consumer needs and caused an increase in oil prices.

Political Factors Whenever a major oil producing country is affected by political conflict, that nation's ability to continue production will be affected.

For example, the political strikes in Venezuela had a detrimental effect on the major oil producer's supplies, causing worldwide shortages and ultimately increasing prices due to disparities with demand.

The Iraq war provided another incident of oil price increases, as the nation's production capability was affected due to military conflicts and terrorist attacks. Speculation Outside of physical supply of oil reserves, the financial market has the ability to change oil prices through speculation.

Essentially, this means financial traders speculate on oil supplies through contracts that are for future shipments, rather than those currently being distributed. This speculation can lead to traders working to raise or lower the price of oil to receive desired profits on purchased contracts.Supply and demand are perhaps the most fundamental concepts of economics, and it is the backbone of a market economy.

Demand refers to how much (or what quantity) of a product or service is. * Price elasticity of demand describes how much a change in price will affect the level of demand for a certain product or service. If a certain good or service has high price elasticity, demand will tend to fall quickly if the price of the good or service increases and demand will increase quickly if the price of the good or service falls.

Another important factor that affects the demand for tourism internationally is the changing demographic composition of the global population.

Globally, the demographic composition of the population has changed and the millenials are more enthusiastic about tourism and travel than the baby boomers.

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We’ve seen that the demand and supply of goods react to changes in price, and that prices in turn move along with changes in quantity. Factors Affecting Demand Elasticity.

Time The third. Price elasticity of supply (PES) measures the relationship between change in quantity supplied following a change in price The ease and cost of factor substitution/mobility: Price Elasticity of Demand and Total Revenue. Study notes. Explaining Income Elasticity of Demand.

Study notes. Explaining Price Elasticity of Demand. Study notes. If you've been in business for at least 6 months with a monthly revenue of $8k, you could qualify.

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Factors That Affect Supply & Demand | Bizfluent