D emand

Demand is an important factor in determining prices. Obviously, demand is not only influenced by price, but also by many other factors, such as the incomes of the demanders and the prices of substitutes. When two goods satisfy similar needs, they are described as substitutes. A change in the price of one item will result in a shift in the demand for a substitute.

In economics, the interaction of demand and price is expressed by the Law of Demand. It describes the relationship between prices and the quantity of goods and services that would be purchased at different prices. It says that the demand for an economic product varies inversely with its price. In other words if prices are high the quantity demanded will be low, if prices are low, the quantity demanded will be high. More people can buy an item at a lower price than at a higher price.

Elasticity of demand is a measure of the change in the quantity of a good in response to demand. Demand is particularly elastic for non-essential commodities (holidays, parties, visits to theatres or concerts, chocolates, etc.).

Demand is called inelastic if a change in price has a relatively small effect on the quantity demanded. Demand for essential commodities (food, clothing, shelter, medical expenses, etc.) is usually inelastic.

SUPPLY

In the world of business supply means the amount of a commodity or service that producers are willing to sell in the market under various conditions.

In economics the interaction of supply and price is expressed by the Law of Supply. The Law of Supply says that the quantity of an economic product offered for sale varies directly with its price. It describes the interaction between prices and the quantity of goods or services that would be offered for sale at all of the possible prices that might prevail in the market. In other words suppliers will offer greater quantities for sale at a higher price and less at a lower price.

Higher prices lead to an increase in quantity supplied. When quantity supplied exceeds quantity demanded at current price, the price tends to fall and quantity supplied decreases.

Supply of many commodities can generally be adjusted to suit market conditions. This means that changes in prices lead to changes in the quantity supplied that can be increased or decreased rapidly in response to market prices.

Supply is determined and influenced by price. But it is also determined by such factors as the cost of production and the period of time allowed supplying to adjust to a change in prices.

It is very important to know the distinction between supply and the quantity supplied. Supply describes the behaviour of sellers at every price. Demand describes the behaviour of buyers at every price. The term "quantity demanded" makes sense only in relation to a particular price.

Price, substitutes, factor, item, services, goods, law

Demand is an important ……………….. in determining prices. Obviously, demand is not only influenced by ……………………., but also by many other factors, such as the incomes of the demanders and the prices of …………….. When two ………… satisfy similar needs, they are described as substitutes. A change in the price of one ………… will result in a shift in the demand for a substitute.

In economics, the interaction of demand and price is expressed by the …………… of Demand. It describes the relationship between prices and the quantity of goods and ………………… that would be purchased at different prices.