Consider the market-response model

Flows and processes of market-response model

The market response model is provided to know the impact on the economy due to scarcity of resources. Lack of resources leads to either price increase or supply increase.

Following outcomes will come due to lack of resources:

• The scarcity of resources will lead to an increment in market response.
• In the market response model, demand and supply are highly affected by price signals that consumers get.
• Due to less supply, the demand will increase, and thus the price will also increase.

Example:

Use of aluminum: If there is a lack of aluminum in the market, then the price will automatically increase. Thus administration and firms need to increase supply. Peoples will start finding a substitute for aluminum, and they will also start recycling it. If they find the replacement, then demand and price both will decrease.