Supply and Demand/Microeconomics - Essay Example

Macroeconomics adopts a wider scope with a bigger picture for instance at the national and international level of economy. Understanding the mechanism of supply and demand therefore squarely falls under the microeconomic scope, with respect to an individual economic entity (investopedia.com, 2010). In order to understand supply and demand, it is imperative to visit the wider host topic represented by market. Demand and supply cannot be talked of without laying the ground work, which is done by outlining relevant issues under market.

Demand and supply are the principal forces that guide the market. A third element creeps in when discussing demand and supply, which is the point of balance between the two factors and is referred to as market equilibrium. It can be said that the market is the platform through which exchange of goods and services takes place. Different forms of market exist but the determining characteristic is how they respond to demand and supply. Markets are also enumerated as the channel through which buyers and sellers interact to meet their interests.

The effect of demand and supply changes affect price in the market, which is a key factor for the operation of business by the market systems (Boyes and Melvin, 2007). According to Boyes and Melvin (2007), give an explanation of demand by the use of five concepts that it is constituted of namely, quantity, willingness, time, price and conditions. The authors claim that there must be a specific commodity or service in contention, whose specific quantity is requested for by the buyers. The buyers must at the same time demonstrate willingness backed by some ability to meet the cost of the good or service.

A timeframe is usually attached to the definition of the particular good or service that the demonstrated willingness and ability to buy persists in the market. Changes in availability of the commodities or services in question must arise with fluctuations in market prices. In