Nobody downloaded yet

Impact of Demand and Supply on Price and Quantity - Essay Example

Comments (0) Cite this document
Summary
The writer of the following essay seeks to provide an understanding of the fundamental concepts in the theory of economy along with the relations among them. Specifically, the essay "Impact of Demand and Supply on Price and Quantity" describes the law of demand and law of supply…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER98.4% of users find it useful
Impact of Demand and Supply on Price and Quantity
Read TextPreview

Extract of sample "Impact of Demand and Supply on Price and Quantity"

Download file to see previous pages For ringing out the inverse relationship between price and quantity, we have to assume that other things are equal which means that all the factors, other than the price of the goods remain unchanged. This is called the ceteris paribus assumption.
In the diagram, the line ABC is called a demand curve which shows the inverse relationship between the price and quantity demanded. The demand curve will always slope downwards to the right. The most important reason for the demand curve sloping downwards is the operation of the law of diminishing marginal utility. The law of diminishing marginal utility explains that the consumer will buy more and more of a commodity only at a lesser price.
The term supply means the quantities of goods and services which a seller is willing and able to offer for sale at a price during a period of time. Thus, supply is always at a price, at a particular point of time and at a certain quantity.
The law of supply states that other things being equal higher the price greater will be the quantity supplied by the producer and lower the price smaller will be the quantity supplied. There is a direct and positive relationship between price and quantity supplied.. ...
LAW OF SUPPLY
The term supply means the quantities of goods and services which a seller is willing and able to offer for sale at a price during a period of time. Thus, supply is always at a price, at a particular point of time and at a certain quantity.
The law of supply states that other things being equal higher the price greater will be the quantity supplied by the producer and lower the price smaller will be the quantity supplied. There is a direct and positive relationship between price and quantity supplied.
ABC is the supply curve. The relationship between the price and quantity supplied is depicted by the supply curve. When price remains constant producers or sellers may come forward to supply less or more at a particular price. This is referred to as a shift in supply.
DEMAND INCREASES and SUPPLY INCREASES
When both the demand and supply increases the quantity will not be much affected because an increase in demand will be met by an increase in supply. This situation mostly is found during the long period when the firm will have adequate time and resources to meet the increase in demand. In the long run, all the factors are variable. Under the long period, supply and demand fluctuate freely and they become equal. Therefore there will not be much increase or decrease in price and price will remain stable. During the long period, there is ample time for the firm to increase the capital for the expansion of plant and machinery to increase the quantity of output, according to the increase in demand. Therefore supply can be changed to meet the increased demand of any commodity.  ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Impact of Demand and Supply on Price and Quantity Essay”, n.d.)
Impact of Demand and Supply on Price and Quantity Essay. Retrieved from https://studentshare.org/macro-microeconomics/1506921-demand-and-supply-essay
(Impact of Demand and Supply on Price and Quantity Essay)
Impact of Demand and Supply on Price and Quantity Essay. https://studentshare.org/macro-microeconomics/1506921-demand-and-supply-essay.
“Impact of Demand and Supply on Price and Quantity Essay”, n.d. https://studentshare.org/macro-microeconomics/1506921-demand-and-supply-essay.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Impact of Demand and Supply on Price and Quantity

Impact of Export Subsidy on Demand, Supply and Price

...of raising the quantity exported (thereby increasing supply) while domestic demand is suppressed. The increase in quantity exported is illustrated by a downward shift in the supply curve of wine exported by an amount equivalent to the amount of subsidy imposed. 2.2 Impact of Export Subsidy on Consumer Surplus As is the case with most macroeconomic policies, it is useful to analyze the welfare effects of export subsidy by analyzing its impact on consumer surplus and producer surplus respectively. The notion of consumer surplus arises when a discrepancy arises between the price that the consumer actually...
17 Pages(4250 words)Assignment

Price Elasticity of Demand

...? PRICE ELASTI OF DEMAND Institute Price Elasti of Demand The principles of demand and supply help in making predictions about the buying and the selling behaviors of individuals as well as firms. A rise in the price of any particular product would lead to a decrease in the quantity demanded of that product, considering that it is not a necessity product. Individuals would not buy the product as they used to and the quantity demanded will fall whilst the firms would supply more of the product i.e. the supply curve will...
2 Pages(500 words)Essay

Price Elasticity of Demand

...?Running head: Price Elasti of Demand for Mylan Laboratories, Pittsburg Introduction The price elasti of demand (PED) is used to measure how price changes affect the quantity of goods or services sold. It is therefore a responsive mechanism and is applied to all industries. The most common description as crafted by Alfred Marshall is the percentage change of the quantity of a product demanded in response to a one percent change in the price of the product with all other factors remaining constant (Marshall 1920). When the change in demand is relatively unaffected (where...
4 Pages(1000 words)Essay

Supply & Demand

...in supply and demand is a universal term that impacts a great level of industries and firms throughout the system; however, even with that being said, it must also be understood that the supply and demand shift that are effected with regards to any salmonella and/or E. coli outbreak are usually regional in scope. Similarly, but somewhat more complex, is an understanding of the shifting nature of demand. With respect to demand there are two key factors, consumer tastes, and the price changes that effect quantity demanded. With regards to consumer tastes, the availability...
3 Pages(750 words)Article

Demand & Supply

...consumer's demand as constant for the purpose of analysis. These factors may include income of the consumer, tastes of the consumer, impact of fashion and style, peculiar consumer characteristics like miserliness, scarcity of good and other choice patterns in consumer behaviour.Under these assumptions the price and quantity demanded are shown as inversely related and the graphical representation of consumer data in this scenario results in a downward sloping demand curve. Law of supply, on the other hand, proposes that firms would supply more of a good at a higher price than they would...
2 Pages(500 words)Essay

Supply, Demand and Equilibrium Price

..."Mrs. Acres Pies and Economic Strategy" Module: The three situations which Mrs. Acres can follow can be represented by the following economic analysis. The first choice that she has is to maintain the current production and to increase the prices for the excess supply to dampen. We can represent the above situation diagrammatically. Case 1: Mrs. Acres increasing prices to meet demand The above diagram represents on way in which Mrs. Acres can act. Here, suppose the initial equilibrium occurs at the point where Demand meets Supply curve at D = S. The equilibrium quantity here is 8000 pies at...
4 Pages(1000 words)Essay

Supply and demand and price elasticity

...1) i) Market can be defined as an or mechanism that brings together buyers and sellers of a particular goods, services or resources in order to determine a price and set equilibrium at point where the plans of buyer meet the plans of the sellers. From the above point, it is very clear that market equilibrium occurs at price or a point where the buyers are willing to buy a particular quantity of goods at a going market price and similarly sellers are willing to sell the same quantity of the goods at the same price. In simple words, market equilibrium is related to demand and supply. In order to understand...
15 Pages(3750 words)Essay

Price elasticity of demand

...Price Elasti of Demand Price elasti of demand is defined as the elasti that measures the nature and degree of the relationship betweenchanges in quantity demanded of a good and changes in its price. ("Price") Its mathematical equation therefore is expressed by this expression: Price Elasticity of Demand = [Q2 - Q1] / [0.5*(Q1 + Q2)] [P2 - P1] / [0.5*(P1 + P2)] In order to find out the elasticity of apples in the market, the following computation is derived: Elasticity of demand of apples = [21 - 30] / [0.5*(30 + 21)] ...
2 Pages(500 words)Essay

Price Elasticity Of Demand

...responsive to price changes. The demand for these products is said to be relatively inelastic. (Daly H.E, 2004 p146) The degree of price elasticity or inelasticity of demand is measured by the coefficient of elasticity. (Pindyck, R. S and Rubinfeld, P. L, 2005) It can be defined as; The percentage changes in the equation are computed by dividing the change in quantity by the original quantity demanded and by dividing the change in price by the original price. (Boyes, W. J, and Melvin, M, 2008p84)Therefore, the formula can be restated as; There are two main reasons why we use...
5 Pages(1250 words)Term Paper

Demand & Supply

...up. Along with the demand in the housing properties, the demand for housing rental is also increasing simultaneously. The essay looks into the different aspects of demand and supply of housing and how the prices change in responses to the changes in the demand for properties for residence. The first part of the essay makes a general discussion of the theories underlying the demand and supply for a commodity. The later part looks at the various aspects of the theories applied to this article under consideration. Relevant figures have been provided to support the essay. General Discussion on...
5 Pages(1250 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Impact of Demand and Supply on Price and Quantity for FREE!

Contact Us