ECONOMICS DE – JARGONED :- Demand and Supply


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DEMAND:

It is indeed uncommon to come across a person who does not DEMAND. Think about it??  All of us have always demanded or expected something in life but the word here will have a different view in the financial arena that does to an extent convey the essential feature of the financial arena i.e values with  a monetary perspective. A lay man’s definition for the word demand would be an expectation. However, in economics the word demand consist of three essential elements which are DESIRE+WILLINGNESS +ABILITY to pay.

So in order  to DEMAND a commodity one must have a  desire to purchase  that   commodity backed by the ability to pay which in other words would mean the financial capacity and also the willingness to pay the required price .According to the law of Demand when the price of the product increases the Demand decreases and when the price of the product decreases the demand increases provided other things remain constant with an exception for Giffen goods, luxury goods, Emergencies and also change in fashion we all guilty of the fact when it comes to our favorite ambassador or favorite dress regardless of the price we tend to demand that commodity.

For example in general when one is expecting a launch of a very good product yet it is not economical at that point of time a commoner would resort to wait until the price decreases .

The former example is a perfect instance where the law of Demand comes into picture.

SUPPLY:

Demand and SUPPLY

Since Demand is the Desire +Willingness and Ability to pay all of this will be worthless if there is no supply .Hence it is not a Who came first-Chicken or the egg Story rather without supply one cannot demand .Supply refers to supply refers to the amount of a product that producers and firms are willing to sell at a given price all other factors being held constant.The supply paradigm of the product changes in different market structures namely perfect competition ,monopoly and oligopoly .

The four basic laws of supply  and demand  are:

  1. If demand increases (demand curve shifts to the right) and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.
  2. If demand decreases (demand curve shifts to the left) supply remains unchanged, a surplus occurs, leading to a lower equilibrium price.
  3. If demand remains unchanged and supply increases (supply curve shifts to the right), a surplus occurs, leading to a lower equilibrium price.
  4. If demand remains unchanged and supply decreases (supply curve shifts to the left), a shortage occurs, leading to a higher equilibrium price.

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However in the world of Economics both supply and Demand are interlinked for they are an essential  economical model of price Determination .A market is in equilibrium namely when the quantity demanded by the consumer is equal to the quantity supplied by the producers at current price .

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For those of us who are commerce students the DEMAND &SUPPLY have a pivotal role in the world of Economics but for the rest it is ECONOMICS DE-JARGON -DEMAND and SUPPLY!

– Khyati Kotiyan


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