Substitution is takes place when one products price is to high or becomes unavailable and households find a new product to substitute it. A classic example is butter and margarine. The price of butter started to increase up to a point where the manufacturers found it feasible to add colorants to margarine and sell it to the people. Margarine1)Featured image: By Bill Branson (photographer) – This image was released by the National Cancer Institute, an agency part of the National Institutes of Health, with the ID 2466 (image) (next).This tag does not indicate the copyright status of the attached work. A normal copyright tag is still required. See Commons:Licensing for more information.English | Français | +/−, Public Domain, https://commons.wikimedia.org/w/index.php?curid=10532192 was substituted for butter simply because it was cheaper and easy to cook with.
The same will apply to petrol. There will become a time when the price of petrol will become so high that it will be feasible for the manufacturers to make vehicles that use alternative fuels such as hydrogen, air, batteries etc.
So a high price for a product is good for the suppliers but they must be careful not to induce a substitution effect on their own product.
Substitution is not necessarily bad. Substituting electrical cars for fossil fuel cars is a good thing. Personally I think butter is a better alternative to margarine, except when I am in a rush to make a sandwich.
Factors influencing the demand of produce
The quantity demanded of a product is the amount that will be purchased per time period under a given set of circumstances. These circumstances is the area that we are interested in. It is usually consumers that influence the demand of a product. The demand for a product can be influenced by the following:
- Good advertising might increase the demand of the product
- It might become a fashionable thing to have the product.
- There might be another product that is sold cheaper resulting in reduced demand and forcing the price down in order for it to be sold.
- A change in household income might change the demand for the product.
- The product might change in terms of quality which can change the demand for it.
- The packaging material will change the demand etc.
A simple thing such as packaging can have a huge influence on product choice. If a consumer has to transport soft produce over a long distance it might be better to choose one that is sold in harder containers than in plastic bags. Quite often the produce sold in punnets or hard containers just look better than those in plastic bags. So the consumer is substituting a product based on packaging. There might be no difference in quality or price at the end, it’s just more about logistics and damage control
Factors influencing the supply of produce
The supply of produce is influenced by factors that affect the farmers themselves in various ways. They are the producers of the produce and anything that affects the farmer’s perception will affect his decision to farm certain products. The farmer is affected by various factors that influences his supply of produce in the following way:
- The cost of inputs (petrol, seed, packaging etc.) can rise forcing him either to stop farming or farm more efficiently (mechanization etc.) or to move to alternative crops.
- A farmer might be influenced by the fact that he thinks the price for a certain product will be very high
Farmers or producers are influenced by a complete set of different factors of those that influence buyers.
Factors influencing price of produce
Price is determined by the pressures of supply and demand for a certain product over a period of time. But what can these pressures be that brings a change in the price of a product. The following is some factors that play a role:
- Change in the income of a household
- The introduction of substitute products
- Changes in what foods are fashionable
- Cultural changes
- Population changes
- Changes in supply and demand
- Marketing of products through ads in newspapers, magazines, TV etc.
|↑1||Featured image: By Bill Branson (photographer) – This image was released by the National Cancer Institute, an agency part of the National Institutes of Health, with the ID 2466 (image) (next).This tag does not indicate the copyright status of the attached work. A normal copyright tag is still required. See Commons:Licensing for more information.English | Français | +/−, Public Domain, https://commons.wikimedia.org/w/index.php?curid=10532192|