Difference Between Supply And Demand
In the competitive model the interaction between supply and demand is is delineated as a relationship charting out the price on the Y axis versus the quantity on the x-axis. The supply curve in general is depicted by an upward sloping curve, were low dollar values are associated with low quantities produced. As the quantity …show more content…
The demand care has a low quantity consumed associated with high dollar price and increasing quantity is associated with lower dollar prices. The relationship of these two slopes of demand vs supply are characteristics of the competitive market. As there is increase supply the cost the price will rise. As there is a decrease in demand the price will also decrease. Where these two curves intersect, there is an equilibrium obtained. At this equilibrium supply equals consumption. When the price is it too high, the demand will decrease and there will be a excess supply or surplus. When the price, however, is set to low the quantity of demand is increased and there becomes a shortage of supply. When such a shortage occurs, the demand for quantity produced will be increased as will the price moving the supply closer to the equilibrium point. In a similar fashion when there is a surplus less quantity will be produced to reduce the excess supply. Market prices will also be reduced to bring the market back to equilibrium. In addition to the effects of shortages and oversupply on the demand and supply, both of these curves can be shifted based on other factors. Anything that increase demand will shift …show more content…
With the supply at normal elasticity the change in quantity equals the the change in price. Therefore the driving force will be the elastic demand causing a greater percent change in quantity compared to the percent change in rpice in a downward (negative direction)
2) supply is normal (elasticity = 1) and demand is inelastic, When the demand is inelastic the is a greater change in percent of price compared to change in quantity. With a normal supply elasticity demand again will be the driving force cause a downward shift.
3) demand is normal (elasticity = -1) and supply is elastic,
With a normal elastic change demand will have little effect on equilibrium and supply will drive the change. With an elastic supply there will be an upward shift, with the being a great percent change in quantity compared to the percent of change in price
4) demand is normal (elasticity = -1) and supply is inelastic, With a normal elastic change demand will have little effect on equilibrium and supply will drive the change. With and inelastic supply there will be little change in quantity with regard to price or otherwise stated a higher percent change in price compared to percent change in quantity in the upward