In economic theory, demand means the amount of a commodity or service that economic units are willing to buy, or actually buy, at a given price.

Most people think of demand as being the desire for a certain economic product. That desire must be coupled with¹ the ability and willingness to pay. 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 inversely² with its price. In other words, if prices are high the quantities demanded will be low. If prices are low the quantities demanded will be high.

Elasticity of demand³ 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 necessity⁴, but particularly elastic for non-essential commodities. The demand curve² is the graphical representation of the demand function, i.e., of the relationship between price and demand.

Supply

In economic theory, the term «supply» denotes the amount of a commodity or service offered for sale at a given price. Business people think of demand as the consumption of goods and services. At the same time, they think of supply as their production. As they see it, supply means the quantity of a product supplied at the price prevailed at the time. If prices are high suppliers will offer greater quantities for sale. If prices are low, they will offer smaller quantities for sale.

Just as in the case of demand, supply is determined also by factors other than price, the most important being the cost of production and the period of time allowed to supply to adjust to a change in prices. remain constant.

The supply curve is the graphical representation of the supply function, i.e., of the relationship between price and supply. It shows us how many units of a particular commodity or service would be offered for sale at various prices, assuming that all other factors

Market Price

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.

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.

In economic markets, buyers and sellers have exactly the opposite hopes and intentions. The buyers come to the market larger to pay low prices. The sellers come to the market hoping for high prices. . For this reason, adjustment process must take place when the two sides come together. This process almost always leads to market equilibrium⁴ — a situation where prices are relatively stable and there is neither a surplus⁵ nor a shortage⁶ in the market.

Market Structures

Market is any arrangement people have for trading with one another. Markets exist whenever and wherever people come together to buy and sell their goods and services. In modern economic systems consumers and producers exchange their goods and services in many competitive markets. The principal kinds of market structures are perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect (or pure) Competition: Many Buyers and Sellers. The laws of supply and demand operate only under conditions of perfect competition. To the economists a perfectly competitive market requires all of the following conditions: