6 Unit TextC Supply
The demand curve shows the relationship between prices and the quantities demanded. The supply schedule and supply curve show the relationship between market prices and the quantities which suppliers are prepared to offer for sale. Supply is not the same thing as 'existing stock' or 'amount available'. We are only concerned here with the amounts actually brought to market and these amounts depend to a large extent on the ruling market price. If a farmer ploughs in his cabbages because he thinics the market price is too low-the cabbages were a part of the existing stock but they never become part of the current supply.
The basic law of supply says 'More will be supplied at a higher price than at lower price'. An increase in price usually means that production will become more prdfitable and we would expect existing producers to expand their outputs in response to rising prices. In addition, in the long run, an increase in price (and hence profits) would tend to encourage new firms to enter the industry
TextB
Demand
The first thing to understand is that demand is not the same thing as desire, or need, or want. We are looking for the forces which determine price, and the strength of the desire for something will not, in itself, have any influence on the price. Only when desire is supported by the ability and willingness to pay the price does it become an effective demand and has an influence in the market. Demand, in economics, means effective demand, and may be defined as 'the quantity of the commodity which will be demanded at any given price over some given period of time'.
Consider the following statements:
-
The demand for commodity X is 1 000 units.
-
The demand for commodity X, at a price of 6 p per unit, is I 000 units.
-
The demand for commodity X, at a price of 6 p per unit, is 1 000 units per week.
Note that only the third statement is meaningful. The first statement is incomplete because the quantity demanded will be different at different price. The second statement tells us the quantity demanded at given price, but it does not tell us how long it will take to sell 1 000 units. Any definition of demand must say something about the quantity, the price, and the time period.
For the great majority of goods and services, experience show that the quantity demanded will increase as the price falls. This particular characteristic of demand may be illustrated by a table described asademand schedule, or, as is more usual, byademand curve, which is a graphical representation of the date in the demand schedule.