Supply and Demand

DEMAND & SUPPLY

Demand

Demand for a commodity refers to a desire backed by a necessary purchasing power. By demand we mean the various quantities of a given commodity or the services of the consumer which consumers would buy in one marketing at a given period of time at various prices or at various prices of the related goods.

Thus demand is not a mere desire but desire with the capacity and willingness to purchase. It is always related to price and should be referred to per unit of time. Demand arises for a commodity with variations in income and variations in price of related goods.

Law Of Demand

The Law Of Demand states that, "The greater the amount to be sold the smaller must be the price at which it is offered in order that it may find at purchasers or in other words the amount demanded increases with a fall in price & diminishes with a rise in price".

Factors Influencing Demand

The demand depends on a number of consumers & wealth of the consumers. An increase in income will push the demand up & a decline will push the demand down.
Demand depends on tastes, preferences, customs & habits of the consumers.
Existence of substitutes for a commodity will affect it's demand.
Expectations of the consumer about the future will also alter the demand.
The demand may change due to change in weather.
Demand for prestige goods, like:- Diamond, Jewelery, etc., will not change as they are status symbols.

Supply

Supply is the total amount of a specific good or service offered for sale per unit of time by a supplier. Prof. McConncil defines supply as, "a schedule which shows various amounts of a product which a producer is willing to & a able to produce & make it available for sale in the market at each specific price in a set of possible price during some given period".

Determinants Of Supply

Number of firms or sellers.
State of technology.
Cost of production.
Price of related goods.
Price expectations.
Natural Factors.
Laborer troubles.
Change in Government Policies.