Supply And Demand, Understanding Economics

If you already run a business then you might have realized by now that even if you have trusted payday advances, nothing is more important than the chain of supply and demand. Supply refers to the quantity of as commodity that the seller is willing to sell at some particular price and demand refers to the quantity of a commodity that the customer is willing to buy at a certain price.

Supply and demand are absolutely interdependent and they are an integral part of economics. In fact, for determining the price, this model is used in the economic theory. Usually, on the basis of the interaction of supply and demand that takes place in the market, the prices of the commodities are determined. Whatever output comes, it is known as the equilibrium price which is like an agreement between the consumers and the producers.

Demand Curve

Factors like prices of the commodities, seasonal effects, preferences and incomes of a customer influence the quantity of a commodity demanded. Usually in economic analysis, all these factors remain constant except the prices of the commodities. Then the relation between the price levels and the maximum quantity which will be bought by customers are examined. This price quantity relation is usually represented on a curve which is called the demand curve. Mostly, this curve is downward sloping, which means that the consumers are willing to buy more of the commodity at a cheaper price.

Supply Curve

The quantity of a commodity depends on production technology, prices of substitute products, cost of labor and of course its availability. An economic analysis observes the relation between the prices and the quantity provided by the producer at each price keeping rest of the factors as constant. Usually, a supply curve is upward slopping which means that the producer is willing to sell more commodities at higher prices.