Introduction
The demand and supply illustrate the market dealings among the potential buyers and sellers of a given commodity. The two are supposed to establish the equilibrium price and amount sold in the trading setup. The supply and the demand model forecasts that the price works to ensure equality of the amount demanded by buyers and the amount supplied by the manufacturers leading to the achievement of a monetary price and quantity balance mostly in a competitive market.
The law of demand states that the increases in the price of a normal good lead to a decrease in quantity demanded of that good, all factors held or ceteris paribus and vice versa. On the other hand, the law of supply states that increases in the prices of a normal good will consequently lead to an increase in the amount supplied and vice versa when all other factors are held constant. In addition, the law of demand and supply dictates that the equilibrium price and amount of goods in the market lie at the meeting point of the buyer demand and the producer supply. At this point, the amount demanded =amount supplied, and prices remain stable at this level.
In the P.O.W. camp, the number of people living in a camp was around 1200 to 2500, and these people were prisoners or soldiers abducted to fight on behalf of other countries during the Second World War. These people lived in big houses and could socialize and trade with others. Therefore, the market setup was simple, and in most cases, the amount supplied kept on changing considering that the conditions of an effective trade were undesirable and these prisoners had to depend on their countries and Red Cross for their food and cigarettes supplies. Therefore, they had little control over the forces of demand and supply in their trading setup.
Thesis statement
The paper attempts to investigate how the supply and the demand of the food and the cigarettes affected the price in the P.O.W. camp or at the time before and during the Second World War, considering that the market was not developed and the factors of holding an effective were unfavorable. Secondly, the currency system was undeveloped as many people depended on the barter trade to obtain food and cigarettes hence the forces of demand and supply were as there was no commodity that had a standard of value to be used as money, and many opted to use cigarettes which varied in size and quality. Therefore, the paper would like to explore how the amount supplied and demanded influenced the prices of the basic commodities in such a market set up and at a time when conditions for trade were unfavorable.
The main body
The amount supplied of both commodities tended to affect their respective prices. For instance, the cigarettes and the food packages were supplied on a weekly basis, mostly on Mondays. This caused the noneconomic demand for cigars to rise, and less elastic than the amount of food demanded. Hence the prices of these goods varied on a weekly basis where they would drop just before Sunday night and ascending stridently on a Monday morning. However, the problem would be solved by the people storing some of the commodities hence avoiding acute shortage.
Secondly, the arrival of new prisoners of war would basically lead to an increase in the amount demanded of cigarettes and food. For instance, intense air invasion of the camps led to the rise in noneconomic demand for cigars and a heightened general fall in the price of the two commodities. In addition, the good and the awful reports war, as well as the general expectations of new supplies or lack of supplies, would affect the price of a good, for example, in March of 1945, when prisoners were taking their breakfast, news spread through the camp of new arrivals of food and cigarettes supplies. Many people entered into a deal of selling their treacle share at four cigarettes or even three, however later, the gossip was rejected, and even a treacle for two cigars was difficult.
Thirdly, the variations in the price makeup are caused by the variations in the amount supplied of the two commodities. For example, the changes in the amount supplied in the German allocation range or the structure of the Red Cross packages would lead to variations in prices of one good relative to another. In scorching weather conditions, the price of cocoa falls while that of the soap rises.
The amount supplied of a close substitute similarly affects the price of food and cigarettes. At the same time, cigarettes had no close substitutes; however, there are many types of food, each with a close substitute. When the supplies of close substitutes increase, its prices will fall down and become affordable compared to the other good. For example, the Canadian butter and marmalade because of more value after being sufficiently supplied compared to a loss of value of the German jam and margarine due to reduced supply creating shortage hence rise therefore unaffordable.
Conclusion
The quantity supplied and demanded of the food and the cigarettes has had an influential impact on their respective prices in the P.O.W. camp. However, the impact on the prices of cigarettes was less elastic compared to that of the food. This is mainly because cigarettes were taken as a commodity of trade with the qualities of the money. These include the standard of value, store of value and medium of exchange, whereas food prices were highly responsive to the amount supplied and demanded as they have qualities of a normal good. Therefore, the prices of food were highly influenced by the supply and the demand compared to the cigarettes in P.O.W. camps.
References
Alan Griffiths &Stuart Wall, Intermediate Microeconomics, U.K.: Pearson Education Publisher, 2000.
Frank Cow ell, microeconomics, Oxford: Oxford University Press, 2006.
Radford R.A. “The economic organization of a P.O.W. camp,” London: Blackwell publishing corporation, 1945.
Samuelson, P. A. &William D. Nordhaus. Economics, 17th edition, New York: McGraw-Hill Publishers, 2001.