Supply and Demand

Supply and Demand

Supply and demand is a phenomenon through which prices and quantity demanded is settled in the market . Supply and demand tells us about how much the quantity is demanded by the buyer at a certain price .Supply and demand of any product also informs us if there is any shortage of that product or there is an excess supply of the product

Demand of a product represents the demand from consumers . It is defined as the quantity of goods and service that the consumer is willing and is able

to purchase at a given price level , holding all other non-price factors constant . Demand is therefore a relationship between a price and quantity demanded . Demand curve is a downward sloping which suggests that as the price of any product increase the consumer tends to buy less of that product . For example if the prices of wheat will rise the consumer will buy less of wheat and may buy rice which is a substitute of wheat (Case and Fair , 2006

Other example may include cars . If the price of a certain car increases the demand of that car falls because now people find that particular car expensive and therefore don 't buy it

Textbooks can also have the same effect , if the demand of text books decreases which means consumer is not willing to buy textbooks , then the price of text books will fall

Demand for a product may not sometimes be influenced by price , factors such has Changes in consumers ' Income spent on goods and services Advertising or Commercial ads , Natural disasters (earthquakes tornadoes , floods etc , Changes in the Prices of related goods and services : Substitutes and Complements or Changes in the Tastes of consumers for goods /services can also equally contribute to the demand of any product (Hattwick , 1971

The supply of a product represents the relationship between the quantity of goods supplied by the producers of a good and the current market price . The supply curve is a direct one ( positive sloping which suggests that as the price of a good increases , holding all other non-price factors constant , the producer will be willing to supply more of the product and vice versa . A daily life example of supply of good would be as the corn prices in a country rises the farmer would now plan to plant more of the land with corn as compare to other products (Arnold , 2007

Supply for a product may not sometimes be influenced by price , factors such has the of business firms in an industry , Changes in Technology (or the State of the Art ) of business firms , the Costs of factor inputs of firms (labor , capital etc ,Seasonality (Christmas , Easter , Valentines day etc ) or the rate of growth of the Population can also equally contribute to the demand of any product (Hattwick , 1971

The supply of a product and the demand for any product combines together to form an Equilibrium point is a point where both demand and supply curve...