Demand, Supply, Elasticity and Shortage

KOK HUI MIN 0309998

Economic Individual Assignment

Italy has many popular dishes such as pizza, pasta and others. However, pizza is their main dish overall. During the non-technological era in Italy, pizza was originally made by local Italian but not for now. With the advancement of science and technology, the y generations prefer to work in easy and relax work. They work to earn not to learn. So, Italy appears a shortage of skilled pizza maker problem. Shortage is when the quantity of demand is greater then the quantity of supply (Econtrader, 2012)

What is demand in economic? Demand is a relationship between the quantity of goods or service that consumer want to purchase and the price charged of the goods and service in a given time period (Moffatt, 2013). There have a law demand which is when the price increases, the quantity of demand will decreases and the price decreases, the quantity demand will increases, other things being equal. This shows a negative relationship. The change of demand referred to a shift in the demand curve (Sloman et al, 2012, p. 35). According to the new figures in record unemployment, there are needed at least 6000 pizza makers. The youth prefer work abroad but no to be a pizza maker because they believe that they are too proud to do it and consider this is low-grade job (Roberts, H., 2013). Due to this reason, Italy has faced the shortages of skilled pizza makers in the markets. But, pizza is the fast food that most affordable and convenient food in this country for mostly office workers (Roberts, H., 2013). They are very high demand of pizza in the market.

 Graph 1 shows that the quantity demand of pizza is increase from Q₁ to Q₂. The demand curve shift to right from D₁ to D₂, but the price is maintains. This is the problem that faced by consumers, their demand of pizza is higher then the quantity of pizza produce by the suppliers, even the price of pizza is maintain without discount.

What is supply? Supply is the quantity of goods or service that market place can be offer (Johnson, 2011) The law of supply is when the price rise and the quantity will rise too, when price fall, the quantity fall. This is a positive relationship. A shift in the supply curve is called as a change of supply (Sloman et al, 2012, p. 41).

 Graph 2 shows the problem that faced by the owner of the pizza shop. The quantity of skilled pizza maker is decreases from Q₁ to Q₂ and this is because of the change of supply pizza maker from S₁ shift to the left to S₂. Due to the amount of wages does not increase, so less local youth wants to work as pizza maker.

Based on graph 1 and graph 2, it made a shortage in the pizza market. How it became? The graph below will show it, graph 3.

 This graph 3 shows the shortage of pizza maker, the quantity of the pizza is greater than the supply of skilled local pizza maker. So, there are not enough to fulfill the demand of the quantity pizza that consumers want because lack of the skilled local pizza maker. Point A is the quantity consumer wants but point B is the supplier can produce the quantity. It cannot show the equilibrium in the market. The reason why will lack of the skilled pizza maker, because those local youth feel that the job too low grade, low wages and they have everything. This reason makes those pizza shops’s owner facing a big problem.

 Picture of the quantity supply of pizza maker is less than the quantity of demand pizza that consumer wants.

Equilibrium (E) is a relationship when the price and quantity of demand meets supply in a period of time and in a market. The market will be equal in price and quantity. According to this article, there are no equilibrium shows but shortage. To solve this shortage problem, pizza shop owner hire non-local or immigrants to take over their place.

 Based on graph 4, there is equilibrium in the pizza market. The change of supply curve pizza maker has increases fromS₁ shirt to right to S₂, and the quantity of supply of pizza maker from Q₁ increase to Q_2. However, there are no changes in price. After hired those non-local or immigrants, the pizza market in Italy exist a market clearing, does not have shortage problem shows.

According to Enrico Stoppani, of the Italian Federation of Merchants, there are increasingly 50,000 of foreigners are taking the pizza makers job in Italy and about 240,000 people are Egyptians (Roberts, H., 2013). Due to those local youth do not want to working in long hours time and earn only 1000 Euro per month. But for Egyptians are used to hard working, love cooking and good in learning new things, they are enjoy to work as a pizza maker (Roberts, H., 2013). 1000 Euro is equal to 9,250.71 EGP, there are almost 10 times to work. For example, 10 EGP can buy 3 kilos rice, it is equal to Egyptians can buy more then 30,000 kilos of rice in their country. So, it is a best job for them. This also the one of solution to protect the tradition dish of Italy in Italy for the owner of pizza shop.

Elasticity of demand is to measure the responsiveness change of the quantity demand of goods in its price. The percentage change of the quantity demand is more than the percentage change in price, is elastic. Alternatively, if the percentage change in price is higher than the percentage change of the quantity demanded, is inelastic. The formula for calculate the elastic of demand,

 Elasticity supply is to measure the responsiveness change of the quantity demand of goods in its price. The percentage change of the quantity supplied is more than the percentage change in price, is elastic. If the percentage change in price is higher than the percentage change of the quantity supplied, is inelastic. The formula for calculate the elastic of supply,

 For example to calculate the elastic demand of the quantity of pizza maker,

• -       1000 Euro for the wages to pizza maker, there are no increases in the wages.
• -       2000 quantity pizza maker wanted in market, and increase to 6000 quantities.

Therefore, the elastic of supply is 2. It is more than one, means that the supplied is elastic. So, the graph shows will be,

Reference:

Econtrader Economics (2013) Shortage. Available from: http://www.econtrader.com/economics/shortage/ [Accessed 07 June 2013].

Moffatt, M. (2013) Demand – The Economics of Demand. Available from: http://economics.about.com/od/demand/p/demand.htm [Accessed 07 June 2013].

Sloman, J., Wride, A., Garratt, D. (2012) Economics. 8^th ed. England: Pearson Education Limited.

Roberts, H. (2013) Italy struggles to cope with shortage of pizza makers because they are ‘too proud to do the job’. Mail online [online]. 01 May. Available from: http://www.dailymail.co.uk/news/article-2317796/Italy-struggles-cope-shortage-pizza-makers-proud-job.html [Accessed 04 June 2013].

Johnson, M. (2010) Economic basics: supply and demand. Available from: http://www.sophia.org/economic-basics-supply-and-demand-tutorial [Accessed 06 June 2013].