The concepts related to supply and demand - Term Paper Example

This can be affected by various changes in the economy for example inflation, fashion etc. Supply is the term used to refer to the availability of a commodity in the market. The demand and supply of a commodity exhibit a high correlation which is determined by price (Fisher 2007 p 15). The law of demand states that; the lower the price, the higher the demand but under normal circumstances. On the other hand, the law of supply states that an increase in the price of a commodity results to an increase in its supply.

This essay is an evaluation of the various concepts of supply and demand. The law of demand states that the lower the price of a commodity, the higher its demand (Fisher 2007 p 20). This means that the prices of items determine the willingness of a customer to buy an item. This rule though has its exceptions which may involve circumstances that may result from quality and quantity. In that aspect, a customer may refuse to buy an item for example a vehicle which is cheap but which is highly depreciated even though it may be selling at a lower price than a new one.

The quantity of the item being bought may also influence the customer towards buying a commodity due to the requirements he may be wishing to satisfy (Gorman 2003 p 14). For example, a packet of fertilizer may be selling at a price of $30 for 50 Kg. A similar bag of fertilizer may also be selling at a cheaper price but in a 30 Kg package. In this case, the demand for the 50 Kg package would not be affected since the consumer would be buying according to the vastness of the area the fertilizer is to be applied.

However, the law of demand under the normal circumstances can be represented on a demand curve, whereby the effects of price change on demand can be represented. This curve shows the difference in the quantity demanded as compared to the price change. When the price is at the lowest i.e. P1, the demand becomes high i.e. Q3. When the prices are high i.e. P3, the