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Economic - Essay Example

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Economics mainly deals with the choice and decision making. Understanding of economics concepts is helpful for our lives and existence in today’s world and to understand the functions of the business world. Here we will…
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Economic Essay
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Download file to see previous pages... If the demand for the product is higher than the supply of the product then the price of product will be higher and if the supply is higher than the demand for the product then the price will be lower. Demand means the quantity of a product which is needed by the buyers. There is difference between the term demand and the term quantity demanded. Quantity demanded means the specific amount of the product which buyers want to purchase at the given price. Thus the relationship between the price of the product and the quantity demanded of the product at the price is known as demand relationship. Supply can be defined as the quantity of goods and services offered by the market. Quantity supplied can be stated as the amount of goods and services that suppliers are offering at the current price. The relationship between the supplied amount of products and services is called as the supply relationship.
From the above chart it can be seen that demand is shown as the green line which is sloping downwards and supply is shown as blue lien which is sloping upward. At the price of P and quantity Q, the supply demanded and the quantity demanded has intersected at the equilibrium point. At the point of equilibrium price, sellers are selling all the products which they have produced and buyers are getting all the products which they have demanded. It is the optimal condition in economics when both consumers and sellers are satisfied (Johnson, 2014).
The law of demand defines that when the price of product rises and every other thing remains constant then quantity demand of the product will fall. It means when the price rises then the quantity demanded declines. Every other remains constant is known as “Ceteris Paribus” assumption. It means that wealth; income, population, preferences and price of other goods are constant and remain same.
Shifts in Demand or change in demand happens at the time when any one of the components of demand changes ...Download file to see next pagesRead More
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