Demand
In Economics, demand means the willingness and ability of people to buy goods and services. The people, referred as consumers, can demand for goods and services only if they have money to buy them. The producers will not produce if there is no demand for the product.
The amount of a good or a service that consumers are willing and able to buy is known as quantity demanded.
The law of demand states that the quantity demanded and the price of a commodity are inversely related, other things remaining constant. If the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good.
In normal situations, consumers will demand less quantities of a product as the price of the product increases and vice-versa.
Supply
In economics, supply means willingness and ability of producers to make and sell goods and services. The producers will supply only those goods and services for which there is demand in the market.
The amount of a good or a service that producers are willing and able to sell is known as quantity supplied.
In normal situations producers will supply more goods and services as the price increases and vice-versa.
Demand Schedule
As we know, in normal circumstances, the consumers will demand more as the price of a particular product goes down. Economists gather information from the market about demand of goods and services and enter the data in a demand schedule. An example of a demand schedule is given below.
Demand for Apples
| Price |
1
|
2
|
3
|
4
|
5
|
|---|---|---|---|---|---|
| Quantity Demanded |
50
|
40
|
30
|
20
|
10
|
Demand Curve
From the above demand schedule, we can see that the quantity demanded by the consumers goes down as the price goes up. This can be shown by a graphical representation known as Demand Curve.
Supply Schedule
As we know, in normal circumstances, the producers/suppliers will produce and supply more as the price of a particular product goes up and vice-versa. Economists gather information from the market about supply of goods and services and enter the data in a supply schedule. An example of a supply schedule is given below.
Supply of apples
| Price |
1
|
2
|
3
|
4
|
5
|
|---|---|---|---|---|---|
| Quantity Supplied |
10
|
20
|
30
|
40
|
50
|
Supply Curve
From the above supply schedule, we can see that the quantity supplied by the producers/suppliers goes up as the price goes up. This can be shown by a grapical representation known as Supply Curve.
Market Equilibrium
Market equilibrium is where the quantity demanded equals the quantity supplied. This is the poit at which demand curve meets the supply curve.
In the above diagram, the equilirium price is 3 and the equlibrium quantity demanded and supplied is 30.
Next Topic: Changes in Demand and Supply