Abdul Saleem Theo
M.P.A Previous (Evening)Roll No. 2k8/MPAE/05
Supply and Demand
Supply and demand is one of the most fundamental concepts of economics and it is the backbone of a market.
Demand refers to how much (quantity) of a product or services is desired by buyers. Thequantity of demanded is the amount of product people are willing to buy at certain price.
Supply refers how much market can offer, the quantity supplied refers to the amount of certain good producer are willing to supply when receiving a certain prices.
1. The Law of Demand:
The law of demand says that if price of goods is higher, the less people will demand thatgood, in other words the higher in price, lower the quantity demand. The amount of agood that buyer purchase at higher price is less because the price of good goes up.As a result people will naturally avoid buying that product; they will prefer to buy analternate of that good which reaches their income.
2. Law of Supply:
The law of supply states that if price of good is higher the supply of the good increase, because the producer supply more at higher price, selling a good at higher price willincrease their revenue.
When supply and demand are equal (i.e. when supply function and demand functionintersect) the economy is said to be at equilibrium. At this point, the allocation of goods isat its most efficient because the amount of goods being supplied is exactly the same asthe amount of good being demanded. Thus everyone (individuals, firms or countries) issatisfied with the current economic conditions. At the given price, suppliers are selling all1