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Article Summary & Application of Microeconomic Theories

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Background of the selected article

The article under evaluation is dubbed “Domestic crisis hurting Syrians’ shopping”

(IANS, 2013). However, the researcher interests more on how this has affected demand of

certain products including consumer choice. This and more will be presented in due course of the

analysis.

One of the scenarios refers to Al Shaalan market which serves as a posh market in Syria.

It is reported that there have been fewer people walking into the market to purchase expensive

products recently following the prolonged domestic crisis (IANS, 2013). In this market, the

traders sell varieties of foods as well as clothing; however, due to decreased presence of

customers, the businesses there only sell cheap and affordable Flafel sandwiches (IANS, 2013).

One of the interviewees stated that before they used to eat Flafel sandwiches once in a while but

due to hard economic conditions they now consume it often (IANS, 2013).

Therefore, most of the Syrians have reduced their spending on expensive commodities in

their food list including stopping to purchase expensive food stuff such as meat (IANS, 2013).

As indicated above majority of the Syrians have abandoned fancy restaurants opting for cheaper

ones and settling for affordable or low-priced food (IANS, 2013).

On this backdrop there are issues that come into play as follows:

1. Change in consumer purchasing power parity

2. Change from expensive products to low priced ones

3. Increased demand for affordable products at the expense of highly priced

Exploration of Microeconomic Theories

The first theory refers to supply and demand. One thing is that factors affecting demand

of a commodity include among many changes in tastes, fashion, and preference. In this regard,

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the choice of the consumers to settle for affordable foods as depicted in the article was main a

confirmation that their preferences had also changed. Here, the reader can closely interlink

between demand and change of their tastes and preferences. In principle, a change in any of the

determining factors of demand apart from price makes the demand curve to shift either to the left

or to the right with more or less being demanded at each of the original prices (Mankiw, 2011).

Additionally, a movement along the demand curve takes place when a change in the amount

purchased results from a change in the commodity’s own price (Mankiw, 2011). For instance, in

the case of normal goods, an increase in the commodity’s price leads to a contraction along the

demand curve or a decrease in the quantity demanded (Mankiw, 2008). Still; in the case of

normal goods, a decrease in the commodity’s price leads to an increase in the quantity demanded

or an extension along the demand curve (Mankiw, 2008).

Anyway, the issues above explain well the problem in Syria and the reason behind the

decline in the demand for expensive products such as posh food in Al Shaalan market. Clearly,

the economic crisis may be said to reduce income levels of the citizens hence the reason why

they opt to spend on what is most affordable. See figure 2.1 below.

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Figure 2.1: A movement along the demand curve on Syrian food products

Price D

P2 B

P1 A

D

Q1 Q2 Quantity

Source: (Developed by Author)

In figure 2.1 an increase in price from P1 to P2 leads to a reduction in the quantity demanded from

Q2 after Q1 which effectively represents a movement from A to B along the demand curve. In

light of figure 2.1 above the reader can fully understand the situation in Syria. In essence the

shift from A to B represents the situation in Syria amidst the domestic crisis. In the same respect

it is highly expected that Al Shaalan market must have experienced a decrease in quantity

demanded; and in case one carries out empirical investigations it would be the case that a lot of

products might have gone to waste as there was low demand for them.

Therefore, Q1 refers to the position of most of the products the citizens in Syria believe to have

high prices.

Another theory to be considered refers to consumer theory especially referring to income and

substitution effects. The critical point is that a decrease in income causes substitution effects thus

influencing the demand consumers have towards certain products (Perloff, 2013); moreover, on

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the basis of the same theory it generally the case that consumers would go for that product that

has utility (Perloff, 2013). For instance, in the article it was indicated that most of the consumers

have now been frequently eating Flafel sandwiches yet this was not the case before. It is also the

case that the decision to opt for affordable food staffs and leave out the expensive ones simply

involves consideration for price of substitute goods. Indeed, Flafel sandwiches vis a vis

perceived expensive products may be said to be substitute goods because the rise of the prices of

the latter led to a rise in the demand of the former commodity. Refer to figure 2.2 below.

Figure 2.2: The concept of the Flafel sandwiches and other expensive food products in Syria

amidst domestic crisis

Price

P2

P1

Q1 Q2 Quantity

Source: (Developed by Author)

From figure 2 above the idea is that when prices for some food products increase from P1 to P2

then that would trigger more demand for substitute affordable products (Flufel sandwiches)

hence shift from Q1 to Q2.

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Lastly, the researcher proposes another theory that Al Shaalan market, for instance, can use to

address the changing consumer trend in demand and supply. Therefore, in order to maintain the

clients, the food retailers in Syria can opt for price discrimination (pricing and advertising). This

way they may create different prices to food products so that consumers that cannot afford the

products perceived as highly priced can afford them at the set low price. This indeed could help

in preventing the consumers to shift to other products for the mere reason that they cannot afford

them.

Conclusion

In conclusion it can be seen that the study took into consideration three theories such as demand

and supply, consumer theory, and pricing and advertising especially where the issue of price

discrimination was perceived as a would be solution to the deterioration in prices for food

products in Syria as a result of domestic crisis.

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Bibliography

IANS, 2013. Domestic crisis hurting Syrians’ shopping. [Online] Available at http://www.khaleejtimes.com/kt-article-display-1.asp?xfile=/data/middleeast/2013/October/middleeast_October264.xml&section=middleeast. Accessed on 11.12.2013

Mankiw, G., N., (2011). Principles of Economics. Cengage Learning Publishers

Mankiw, G., N., (2008). Macroeconomics. Volume 1, Elsevier Publishers

Perloff, J. (2013). Macro-Economics. Pearson Education Publishers