Demand, Supply, and Market Equilibrium

Market A market is any effective arrangement which enables buyers and sellers to carry out exchange transactions. Markets are places where buyers and sellers interact to exchange goods and services and set prices. Markets bring together buyers (demanders) and sellers (suppliers), and they exist in many forms.

First: Demand Demand shows the various amounts or quantities of a product or a service that consumers are willing and able to purchase at various possible prices during a specified period of time, other things equal.

The Demand Schedule

The Demand Curve

Law of Demand As price falls, the quantity demanded rises, and as price rises, the quantity demanded falls. In short, there is a negative or inverse relationship between price and quantity demanded. Economists call this inverse relationship the law of demand.

Factors or determinants affecting demand: The item’s own price. Income. Number of buyers or consumers. Consumer expectations (future price changes). Tastes or current fashions. Prices of related goods (substitutes and complementary goods).

Changes in Quantity Demanded and Changes in Demand Change in Quantity demanded Is a change in the amount of a good consumer is willing and able to consume in response to change in the price of the good only; other determinants are equal or fixed. Change in Quantity demanded is a movement along a given demand curve caused by an increase or decrease in the price of the good only.

Changes in demanded (shift in demand) A change in demand is a shift of the demand curve to the right (an increase in demand) or to the left (a decrease in demand). This shift of the demand curve occurs because the changes in the other determinants of demand except the price (income, No. of consumers, expectations, tastes, Prices of related goods).

Shift in demand curve