Free Supply and Demand Essay Sample
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The ideas of supply and demand are very essential to finances, as they are the backbone of market economy. Demand is the competence or the enthusiasm of a consumer to buy manufactured goods at a particular price and given time. The total demanded relate to quantity of the good and services the customers are ready to buy. Demand is recorded on a demand plan, and then plotted on a chart known as a demand curve which goes downwards. The mark stands for the link between cost and the quantity demanded. The quantity demanded is referred to the total of manufactured goods people are ready to buy at a definite price. (Henderson, 2004)
This link flanked by price and quantity demanded is called demand relationship. The law of demand states that while all other factors do not change, if a product is sold at a higher price, less people will ask for that commodity, in other terms, the higher the price of a commodity, the lower the amount demanded, and the inferior the price, the higher the quantity demanded. Consumers do not obtain large quantity of products when prices are high. This is because as the price of a product goes up, even the chance of buying the good is up. As a result buyers will naturally avoid buying a commodity that will make them to give up the spending of something else which is more vital. In standard, each customer has a demand curve for any commodity that he decides to buy. The buyer’s demand curve is equal to the trivial utility curve. After adding up all the buyers’ curves, they end up making the market demand curve for that commodity. (Challen & Thompson, 2009)
Supply indicates how much the sellers can offer to their buyers. The quantity supplied refers to the total amount of certain commodities producers are enthusiastic to supply to their consumers at a certain price. The connection between the amount of commodities supplied to the market and the price they are sold at is called supply association. Price is thus a reflection of demand and supply. The law of supply indicates that the higher the price of a product, the higher the supply, and vice versa. Producers of commodities tend to supply more goods at a higher price because they’ll be selling at a higher profit or increased revenues. Supply involvement is a factor of time unlike the demand relationship. (Adil, 2006)
Time is critical to supply because suppliers must adjust to the situation whenever there is a change in demand and price. For example, if there is increase in the demand and price of umbrellas in an unforeseen rainy season, suppliers may hold demand by using their making equipment more rigorously. However, if there is a climate change during the year, and the umbrellas will be needed, the change in demand and price will stay for long thus the suppliers will have to change their gear and making facilities to meet the lasting level of demand.
Supply and demand have relationship, and affects price in different manners. For example, if a certain item is costing very higher, the demand will decrease, and if the suppliers find an item has a high demand, they will increase its volume of production, and the selling price will go up. However, if demand and supply are equal, they are at equilibrium. Equilibrium refer to the price at which the amount demanded by the buyers and the amount that the firms are capable of supplying goods and services are equal. In other words, the total commodities supplied is equal to the total commodities demanded therefore every person is satisfied with the recent economic situation. When supply and demand is equal, it is said to be at equilibrium; however, if the supply exceeds demand, demand exceeds supply, or the two are not balanced, there said to be points of disequilibrium.
Without a shift in demand or supply the market price will remain the same. A shift of demand or supply curve occurs when the amount of product’s demanded or supplied changes even though the price remains the same. Shift occurs due to certain factors rather than price. For example, the price of cooking oil is $4 and the amount of a certain type of cooking oil demanded increased from quantity 1 to quantity 2, there will be a shift in the demand for a certain type of cooking oil. Shifts in the demand curve means that the original demand connection has changed; this shows the quantity demanded has been affected by another factor and not the price. A shift in the demand connection would occur, if for instance, suddenly that type of cooking oil is the only type of cooking oil which is available in the market. There are other factors which might lead to a shift in demand curve these may include; if a substitute of a certain product increases its price or a complement of that commodity lowers its price. The consumers may as well want to change their tastes and preferences in favor of the product.
On the other hand, if the price for cooking oil was $4 and the amount supplied went down from Q1 to Q2, then there would be a shift in the supply of cooking oil. This will show that the previous supply has changed. This shows the amount supplied is affected by various factors other than the price. A shift in the supply curve would occur due to; for example, there might be a natural disaster which will cause the shortage of raw materials used to produce cooking oil thus there will be less supply. There other factors which may source a move in the supply arc, and these may include; development in the production technology will lead to high output and competence in the production process thus the supply will increase and lower the cost for businesses. Favorable climate will also lead to higher yields for agricultural commodities. (Gwartney & Stroup.L, 2010)
Supply and demand is a basic feature in determining the character of the marketplace. This is because it is known to be the main determinant in location up the cost of commodities and services. The availability or the supply of commodities or services is a main indication in knowing the price at which those commodities or services can be obtained. For example, an industry giving some services but has not much competition in the area will be able to control the price than will an industry working in a highly spirited location. Accessibility establishes the pricing structures in the marketplace; however, demand must also be there.
For example, an industry may produce vast number of a product at a low cost, but if there is little or no demand at all for the manufactured goods in the marketplace, the manufacturing will have no alternative but to sell the manufactured goods at a very low price. On the other hand, if the marketplace shows friendly to the manufactured goods that is being sold, the industry can set up a higher cost for the product. This demonstrates that supply and demand are closely entangled economic perceptions. Definitely, this shows how supply and demand is regularly mentioned as among the majority basic in all of economics.
Supply and demand is a basic feature in determining the character of the marketplace. This is the major determinant in setting up the cost of commodities and services. The law of demand equates extra things, as the price of a commodities rises, its quantity demanded falls.
Demand can be signified as the quantity of a product or service which is required by consumers, while the quantity demanded can be defined as the amount of a manufactured goods customers are willing to buy at a particular price; the two(demand and quantity demanded ) defines a demand relationship.
Supply is what the market can offer. The quantity supplied is the quantity of goods producers are willing to supply at a particular price. The law of supply states that the higher the price of a commodity, the higher the supply, and vice versa.
Supply and demand have relationship, and affects price in different ways. However, they are they are believed to be at equilibrium when both demand and supply are equal. However, if the supply exceeds demand, demand exceeds supply, or the two are not balanced, there said to be points of disequilibrium, resulting to shift.
A shift of demand or supply curve occurs when the amount of product’s demanded or supplied changes even though the price remains the same. Shift occurs due to certain factors rather than price. In demand, if a substitute of a certain commodity increases its price or a complement of that commodity lowers its price. The consumers may also want to alter their tastes and preferences in favor of the product. In supply, there other factors which may cause a shift in the supply curve, and these may include; improvement in the production technology will lead to high output thus the supply will increase. Favorable climate will also lead to higher harvest and the supply will be high.
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