Market categories

(demand, supply, price)

1.What is a demand?

Most people think of demand as being the desire for a certain economic product. That desire must be coupled with the ability and willingness to pay. Effective demand, that is desire plus ability and willingness to pay, influences and helps to determine prices.

2.What does the law of demand state?

In economics the relationship of demand and price is expressed by the Law of Demand. It says that the demand for an economic product varies inversely with its price.

3.How do prices affect the quantities demanded?

Prices are high the quantities demanded will be low. If prices are low the quantities demanded will be high.

4.What is demand elastic?

Elasticity of demand is a measure of the change in the quantity of a good, in response to demand. The change in demand results from a change in price. Demand is inelastic when a good is regarded as a basic necessity, but particularly elastic for non-essential commodities.

5.When is demand elastic?

When costumer buy a great money more units of products because of a relatively small reduction.

6.When is demand inelastic?

For other products the demand is largely inelastic. This means that a change in price causes only a small change in the quantity demanded. A higher or lower price for salt, for example, probably will not bring about much change in the quantity bought because people can consume just so much salt. Demand is inelastic when a good is regarded as a basic necessity, but particularly elastic for non-essential commodities. Accordingly, we buy basic necessities even if the prices rise steeply, but we buy other things only when they are relatively cheap.

7.What is supply?

Supply may be defined as a schedule of quantities that would be offered for sale at all of the possible prices that might prevail in the market. Everyone who offers an economic product for sale is a supplier. In economic theory, the term «supply» denotes the amount of a commodity or service offered for sale at a given price.

8.What does the law of the supply state?

The law of supply states that the quantity of an economic product offered for sale varies directly with its price. If prices are high suppliers will offer greater quantities for sale. If prices are low, they will offer smaller quantities for sale

9.How much of a product will suppliers offer for sale at different prices?

If prices are high suppliers will offer greater quantities for sale. If prices are low, they will offer smaller quantities for sale

10.What role do prices play in a market structure?

Prices play an important role in all economic markets. If there were no price system, it would be impossible to determine a value for any goods or services. In a market economy prices act as signals. A high price, for example, is a signal for producers to produce more and for buyers to buy less. A low price is a signal for producers to produce less and for buyers to buy more.

11.What characteristics do prices have in a market economy?

. Prices serve as a link between producers and consumers. Prices, especially in a free market system, are also neutral. That is, they favour neither the producer nor consumer. In economics, the term «price» denotes the consideration in cash (or in kind) for the transfer of something valuable, such as goods, services, currencies, securities, the use of money or property for a limited period of time, etc. In commercial practice, however, it is normally restricted to the amount of money payable for goods, services, and securities.