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Supply and Demand

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Avatar for Jm1216
Written by   2
5 months ago

1. Market serves as the venue of exchange between buyers and sellers. The exchange may include products,goods or services in return of cash or even products/goods/services also. There are three types of market:

- Goods market= which is the most common type of market where commodities can be satisfied because of the availability of goods to be used or consumed by the consumers.

- Labor market= the most prominent product in it are man-power/labor/service that is compensated by certain amount.

- Financial Market= a market that is mainly focused on stocks,shares and even securities.

2. Demand is the willingness and ability of the consumers/buyers to buy certain goods, products or services while supply is the willingness and the capacity of a seller to produce products/goods or services that will satisfy the demands of its clients.

3. Law of Demand

- It is focused on the perspective of buyers and it describes the behavior of buyer's demand when there is a change in price. It states that "if the price increases, the demand for the certain product will decrease while when the price decreases, then,the demand for the certain product will increase. In that statement, we can conclude that price and demand have an inversely proportional relationship.

Law of Supply

- It is focused in the perspective of the sellers and it describes the behavior of sellers when there is sudden change in price of products. It states that "if the price increases , the supply of the certain product will also increase while if the price of the product decreases,then, the supply will also decrease. In that statement, we can conclude that price and the supply have directly proportional relationship.

1. Market equilibrium is a phenomenon or a situation where the supply is equal to the deman in the market. There is no shortage or surplus because the demand and supply is balance. This situation will lead to a stable price. Also, in graphical description, it is the intersection of demand curve and the supply curve.

2. Commodities serves as part of our daily lives. It is necessary for survival and for production of other materials because it is also raw materials that can transform to its final output. We can't survive if we lack our basic need such as commodities where our life depends to be able to live. Also, it can be used to produce other products to be used or sold that can help not only the consumer itself but also the other people in the surroundings.

3. Demand and supply plays an important role in the study of economics. Whether it is a microeconomics approach or macroeconomic approach.


-Demand is the willingness of buyers to buy certain product or service.

-Demand schedule is a tabular representation that shows the quantity of product that will be demanded by the buyers at a certain price.

- Quantity demanded is the total of the demand in the market at a given price

- Change in Quantity demanded is the graphical representation of cumulative quantity demanded and it shows movement of the point in the demand curve.

There are factors that serves as catalyst for demand of buyers called determinants:

1.Consumer Tastes and Preferences

2.Consumer’s Income


4.Prices Related Goods

-Substitute Goods

-Prices of Complementary Goods

5.Expectations of Future Prices

Elasticity of demand- it shows how the price will affect the demand of buyers. It can be seen in a graph where a demand curve is at.

Determinants of Elasticity of Demand:

1. Luxuries vs. Necessities - the demand for “necessities” tends to be inelastic; the demand for “luxuries” tends to be elastic.

2.Proportion of Income - other things being equal, the larger a commodity shares in one’s budget, the greater will be the demand elasticity for it.

3. Substitutability - the more substitutes there are for a commodity, the greater the elasticity of demand.

4. Time


Supply - is the amount of goods that a seller is willing to sell and produce at the market.

Supply Schedule - it is the amount of the products that a seller is willing to produce at a given price.

Quantity Supplied - is the total amount of supplies that was produced in the market

Changes in Quantity Supplied - is the representation of the supply schedule in graphical form that shows the movement of the curve as the price changes.

Factors that affects the supply in the market:

1.Technological Process

2.Number of Sellers

3.Cost of Production

4.Expectation of Future Price

Elasticity of supply : describes how price affects the supply in the market.

Determinants of the Elasticity of Supply

1.Limited Amount of raw materials

2.Difficulty of Producing goods

3.Time Period

4.Market Period

-Short Run

-Long Run

5.Production Surplus

6. Inventories

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Written by   2
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