Supply And Demand Essay Examples

1) The supply is the amount of goods and services offered for sale on the market at a certain price. It depends on prices: the higher they are, the higher is the offer from the seller, since the latter is interested to get as much money from the sale of goods (services) that makes his economic interest. This is called the law of supply. Quantitative dependence suggestions from a change in the price of goods called "supply elasticity". It is measured as the ratio (in percent) growth of volume of supply to higher prices.
2) The term "demand" in economics means solvent need, i.e. need that the subject is able to pay. Economists distinguish an individual demand as the demand of individual consumer and market demand, consisting of the sum of individual demands. From this definition it follows that the demand for a particular commodity (service) depends on the price. This dependence is shown by the demand curve.
3) The interaction of demand and supply determines market equilibrium. Market equilibrium is a market state in which the volumes of demand and supply coincide. The curves of supply and demand in point of quantity and price equilibrium intersect. Consequently, the market is in equilibrium when with a certain volume of market transactions in physical terms, the demand price equals the supply price or when at a certain price the projected value of demand and supply are equal to each other.
4) Elasticity of supply and demand means the relative degree of variability of supply and demand under influence of relative changes in market prices. If the amount of demand and supply increase exceeds the growth of market prices, expressed in percentages, they are elastic. Contrary, if the growth of demand and supply (in percent) is less than the increase in the market prices (in percent), they are inelastic. In other words, if after significant changes in the level of market prices, volumes of supply and demand remained unchanged, then they are called inelastic.
For example, the demand for food products (bread, milk, meat, salt, sugar etc.) is considered inelastic because it is the commodities of daily use. Consumers will purchase these products, no matter how high the market price for them is. On the other hand, the demand for luxury items, such as products made of precious metals is elastic.