Demand and Supply

Demand is desire to purchase and ability to pay for a commodity.

Demand comes from the people who buy commodities. And they are called as consumers.

Supply comes from the producers. Supply means the amount offered for sale at given price.

Price

Production technology, prices of factor of production, prices of other products, number of producers, future price expectations, taxes and subsidies, non-economic factors like natural calamities, war and epidemics.

If price rises demand falls if demand rise price falls.

The greater the amount to be sold, the smaller must be the price at which it is offered. In other words the amount demand increases with a fall in price and diminishes with a rise in price.

This law is not applicable for necessary goods like rice luxury goods like gold and diamond.

As price of commodity rises the quantity supplied is extended and as the price of commodity falls the quantity supplied is contracted. This is called as law of supply.

Price and demand

Price and supply

Price and income

Price and tax

necessities

comforts

luxuries

very low priced goods

Taste and preference

Production technology

No. of producers

Price of factors of production

inverse relationship between price and quantity

direct relationship between price and quantity

Both

None

Demand

Supply

Production

Stock

Supply

Production

Consumers

Stock

Production

Sales capacity

Prices

Quality

price and supply

price and demand

demand and supply

price and tax