The law of demand indicates that other factors held constant the higher the price of quality the lower the quality of the product is demanded. Similarly, the law of supply stipulates that the supply of a product diminish when prices reduce.
In a situation when the supply and demand curve intercepts, quantity and price are said to be in equilibrium (Dixon et al. 21). The economy, in this case, is said to be at equilibrium since what is supplied is equivalent to what is demanded.
D S
Pe E
S D
Qe
An example of the product is potatoes. Often during rainy season, there is plenty of supply of potatoes. This goes certainly lowers its price since the market has a surplus of the product. As shown in the above graph DD is the demand curve while SS is the supply curve. Pe and Qe are equilibrium prices and quantity price.
The shift in demand d and supply illustrate the changes in the market which are influenced by various other factors other than price. They include changes in preferences and tastes, nature of goods, time, weather conditions among other factors.
Pe1 D D1 E1 S1 S
Pe S1 E
S D D1
Qe
When there is the shift in supply and demand remains constant, then the prices will remain constant while the quality supplied reduces SS-S1S1. Similarly, when the demand for potatoes increases the quantity demanded increases. This will create a shift in demand curve from DD-D1D1
The economic concept of elasticity touches on the responsiveness of the product. This is the responsiveness of changes in the quantity and changes in prices (Yam 12). If the elasticity is less than one, then the curve is considered inelastic while if it is over one, then the curve is seen as elastic.
Work Cited
Dixon, Mark, Thomas Albrechtsen, Samuel Hejslet, Jesper Smalbro, and Jacobsen M. Vestbo. Supply & Demand. Mark Dixon & Thomas Albrechtsen, 2010. Print.
Yam, Ka M. "Effects of responsiveness on supply chain management." Print.
