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DEMAND AND SUPPLY (Economics Notes)
- What is Demand?
Meaning: Demand means how much of a product or service people are willing and able to buy at different prices during a given time.
Itโs not just wanting something โ you must also have the money and readiness to buy it.
๐ Example: You may want an iPhone, but if you donโt have money, itโs not your demand.
Law of Demand
"When the price of a product falls, people buy more of it. When the price rises, people buy less of it (other things remaining constant)."
Price โ โ Demand โ
Price โ โ Demand โ
๐ Example: If mangoes are โน100/kg, you may buy 1 kg. If price drops to โน50/kg, you might buy 2-3 kg.
Demand Curve
Usually downward sloping (from left to right).
Shows inverse relation between price and demand.
Factors Affecting Demand (Determinants)
- Price of the good โ main factor.
- Income of consumers โ higher income = more demand.
- Tastes & preferences โ trends, fashion, health concerns.
- Prices of related goods:
Substitutes (tea vs coffee)
Complements (car & petrol)
- Future expectations โ if people expect prices to rise, they buy more now.
- Population size โ more people = more demand.
- What is Supply?
Meaning: Supply means how much of a product or service sellers are willing and able to offer at different prices during a given time.
๐ Example: A farmer has 50 kg of wheat. If price is low, he may sell less in the market. If price is high, he will sell more.
Law of Supply
"When the price of a product rises, producers supply more of it. When the price falls, they supply less (other things remaining constant)."
Price โ โ Supply โ
Price โ โ Supply โ
๐ Example: If the price of wheat is โน20/kg, farmers may sell 30 kg. If price rises to โน30/kg, they may supply 50 kg.
Supply Curve
Usually upward sloping (from left to right).
At equilibrium, both are satisfied.
- Key Differences (Demand vs Supply)
Basis Demand Supply
Meaning Quantity buyers want to purchase Quantity sellers want to offer Relation with Price Inverse (Price โ Demand โ) Direct (Price โ Supply โ) Curve Downward sloping Upward sloping Focus Buyers/Consumers Sellers/Producers
โ
In short:
Demand is about buyers โ "How much do I want at this price?"
Supply is about sellers โ "How much will I sell at this price?"
Together they decide the market price.
