Let us discuss about two very important terms in 'Economics' - SUPPLY and DEMAND.
These terms refer to the behaviour of people as they interact with one another in competitive market( a place where buyers and sellers interact).
Demand is a customer's ability and will to purchase goods at various prices at various points of time. This takes us to
LAW OF DEMAND- it states that there is an inverse relationship between quantity demanded of goods and price of that in a defined time period, ceteries paribus. (all other factors remaining constant). It simply means when the quantity demanded of a good increases, the price falls.
DEMAND CURVE is a graph showing the relationship between price of goods and quantity demanded. This curve will be a downward sloping one. Any change that shifts the curve to right is called an increase in demand. Any change that shifts the curve to left is called a decrease in demand.
Non- price determinants in demand include- tastes, number and price of complementary goods, number and price of substitute goods, income, distribution of income of customers etc.
Let us take a look at supply now.
Supply is willingness and ability of producers to offer goods in the market for sale at various prices.
The quantity supplied of a good rises when price of a good rises, ceteries paribus. In other words, there is a proportional relationship between quantity supplied and price of a good.
SUPPLY CURVE is a graph showing the relationship between the price of a good and quantity supplied. This curve will be an upward sloping one although sometime it can go downward. A shift in the curve to the right indicates an increase in supply while a shift in the curve to the left indicates decrease in supply.
Non price determinants in supply include- costs of production, profitability of alternative products, profitability of goods in joint supply, aims of producers etc.
These two terms must be given emphasis in order to understand Economics in a better way.
These terms refer to the behaviour of people as they interact with one another in competitive market( a place where buyers and sellers interact).
Demand is a customer's ability and will to purchase goods at various prices at various points of time. This takes us to
LAW OF DEMAND- it states that there is an inverse relationship between quantity demanded of goods and price of that in a defined time period, ceteries paribus. (all other factors remaining constant). It simply means when the quantity demanded of a good increases, the price falls.
DEMAND CURVE is a graph showing the relationship between price of goods and quantity demanded. This curve will be a downward sloping one. Any change that shifts the curve to right is called an increase in demand. Any change that shifts the curve to left is called a decrease in demand.
Non- price determinants in demand include- tastes, number and price of complementary goods, number and price of substitute goods, income, distribution of income of customers etc.
Let us take a look at supply now.
Supply is willingness and ability of producers to offer goods in the market for sale at various prices.
The quantity supplied of a good rises when price of a good rises, ceteries paribus. In other words, there is a proportional relationship between quantity supplied and price of a good.
SUPPLY CURVE is a graph showing the relationship between the price of a good and quantity supplied. This curve will be an upward sloping one although sometime it can go downward. A shift in the curve to the right indicates an increase in supply while a shift in the curve to the left indicates decrease in supply.
Non price determinants in supply include- costs of production, profitability of alternative products, profitability of goods in joint supply, aims of producers etc.
These two terms must be given emphasis in order to understand Economics in a better way.
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