Macroeconomics - Supply And Demand - Term Paper Example

Demand, in this context, refers to the quantity of goods and services, which are desired by consumers at any given time and price. For example, if the demand for Laptops is said to be higher than that of Desktops, it means that majority of consumers in the market prefer buying laptops over desktops and hence those businesses dealing with these items would have to consider stocking more laptops than desktops or otherwise risk making losses or minimal profits as a result of low sales. Supply on the other hand refers to the level at which producers avail their products to the market.

In this context, if the supply of a commodity is insufficient, then it means that there would not be enough in the market to satisfy the quantities needed by consumers (Thompson 18). In this paper, I will discuss, in detail, factors that affect supply and demand for commodities. With regard to demand, I will discuss factors such as price, which will be explained through a demand curve in order to illustrate the law of demand, income, and future expectations, which will show that customers may refuse to buy commodities in large quantities if they are aware of a possibility of a reduction in price within certain duration of time.

Tastes and preferences will also be discussed as having a short term influence on demand as they are subject to rapid change. Factors affecting supply as discussed herein will include prevailing market prices of commodities, illustrated through a supply curve, government policies and speculation. The law of demand states that the higher the price of a commodity, the lower the demand and the lower the price the higher the demand. It therefore goes without saying that price is one of the most important determinants of demand (Krugman 25).

Consumers will always consider foregoing expensive items in their budget especially if there are substitutes, which are selling at a lower price or simply due to opportunity cost. For