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an>If both capital and labour resources are occupationally mobile then the elasticity of supply for a product is higher than if capital and labour cannot easily and quickly be switched

 

+ Time period involved in the production process

 

Supply is more price elastic the longer the time period that a firm is allowed to adjust its production levels (2007).

 

MARKETS AND ADJUSTMENT OVER TIME

 

Price expectations and speculation:

 

Look at two graphs above, we can see that prices always change, they do not stay at the same. They can go up or come down. Due to prices tend to change in the future, it will affect on the demand and supply now. For example, it is now, iPhone 3GS have just appear, you are thinking of buying a new iPhone 3GS, you might to decide to wait until the price of iPhone 3GS fall slightly when iPhone 4G is sold on the market. On the other hand, if the price of iPhone 3GS come down in the short run, you might well buy it now because they fear that the price will have gone up by then. When people believe that the price will go up, it causes them to buy now, in contrast, when people believe that the price will come down, it causes them to wait. For seller, if they are thinking of selling their stocks, while prices are falling, they will want to sell it as soon as possible. On the other hand, if prices are rising gradually, they will want to keep it as long as possible in order to get the best price. Thus a belief that the price will go up or come down will cause people to sell or wait.Speculation is the behavior of looking into price in the future and affecting buying and selling decisions based on their anticipations. Speculation is applied in many markets such as the stock exchange, the foreign exchange market, the gold market and the housing market, ect.

 

According to John Sloman, speculation can either support to reduce price fluctuations or make them get worse: it can be stabilizing or destabilizing.

 

Stabilizing speculation:

 

When suppliers and demanders believe that a change in price occurs only in short run, speculation wil tend to have a stabilizing effect on price fluctuations.

 

For instance, an increase in demand is the reason why price rise. In the graph above, demand has shifted from D1 to D2. Equilibrium has moved from point a to b, price has increased from P1 to P2. People believe that price will rise just in temporary, before price fall again, suppliers bring their goods to market now. Thus shifts from S1 to S2. In contrast, demanders will wait until price does fall again. Demand shifts from D2 to D3. The equilibrium moves to poi本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。