Global Market Astro briefs on the supply and demand in economics to the blog readers. Supply and demand are one of the most essentialconceptionsin economics and acts the primary factors of market economy. What is 'Demand'The demand in an economic may be described as a consumer's desire and willingness to buy, paying a price for a specific good or service. Apart from other constraints, the price of a good or service rises as its demand increases and vice versa. Law of Demand: The law of demand states that, if all other economic factors remain equal, the higher the price of a good, the less number of people will demand that good. In other words, if the price is higher, the quantity demanded becomes fewer. The amount of a good that buyers purchase at a higher price is less because as the price of a good rises, so does the opportunity cost of buying that good. As a result, people will naturally avoid buying a product that will force them to skip the consumption of something else they value more. The chart below shows that the curve is a downward slope. A, B and C are points on the demand curve. Each point on the curve reflects a direct correlation between quantities demanded (Q) and price (P). So, at point A, the quantity demanded will be Q1 and the price will be P1, and so on. The demand relationship curve illustrates the negative relationship between price and quantity demanded. The higher the price of a good the lower the quantity demanded (A), and the lower the price, the more the good will be in demand (C). What is 'Supply’ Supply is a fundamental economic concept that refers to the total amount of a specific good or service that is available to consumers. Supply can relate to the amount available at a particular price or the amount available across a range of prices if displayed on a graph. This relates closely to the demand for a good or service at a particular price; all else being equal, the supply provided by producers will rise if the price rises since all firms look to maximize profits. Law of Supply |
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September 2016
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