Importance Of Demand In Economics

1932 Words 8 Pages
{f Introduction}

The subject of economics holds many theories and laws. One such theory is that of supply and demand. Supply and demand has shown to be a fundamental of economics, explaining a large portion of business and corporation affairs; it is the main support of the market economy. The theory of supply and demand describes the relationship between the supply of a product and the demand for that product. In other words, the law shows the effect that the desire for a product has on its set price.

The law is expressed through the variables of quantity and price. The demand of a product refers to the amount of desire to buy a product at a given price. The demand relationship is known as the relationship between the price and the quantity
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The distribution of goods is most efficient at the equilibrium point due to the synchronization of the quantity desired and the quantity of goods produced. At this point, every company, individual, or system involved is content. The production companies are doing what the people want by manufacturing products that are longed for, while the people are doing what the companies want by buying their goods. Equilibrium does not occur in regular market economies due to the ever changing prices of products and quantities produced of the product.

The study was aimed at observing the economic subject of supply and demand to determine the underlying importance and function of it. The theory holds true for most situations and has shown to be accurate through computational models and research. The importance of the laws relates to the overall economy, specifically the market. Through the models, the idea can be theoretically proven; however, with computational experiments there will be differences from the actual workings of the
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The first model seen in figures 1-2, titled “Supply and Demand”, is a graph ranging from 0 to 100 on both the X and Y axes. The X-axis is labeled with the independent variable of quantity, with a smaller tag for the equilibrium X-axis line of Qe. The Y-axis is marked with the dependent variable of price, and possesses a small label of Pe for where the equilibrium line of the Y-axis begins. The first model has two factors that can be altered and manipulated, that of supply and of demand. These factors can be moved left or right, representing more or less of that factor. The graph holds two intersecting solid lines that represent the supply and demand curves, as well as two intersecting dashed lines which represent the equilibrium points. The supply curve is always positive, while the demand curve is always negative, and the solid equilibrium point is always where the two curves

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