Law Of Demand And Demand Essay

Law of Supply and Demand — how it applies to all One of the most basic economic laws, the law of Supply and Demand is connected to and is applicable practically into all economic principles in every way. The law of supply and demand explains how prices are fixed for the sale of goods. In its application to the real market, supply and demand pull against each other until the market finds an equilibrium price. Demand is the degree at which consumers want to buy a product. As the Economic theory states, the demand consists of two factors: taste and capacity to buy. Taste, which is the want for a good, decides the eagerness to buy the good at a specific price. Capacity to buy means that to buy a good at a certain price, an individual must have …show more content…
When the demand for the good is high, producers can charge high prices for it. The chances of earning large profits are higher this way and it inspires the producers to manufacture goods to meet the consumer’s demands. On the other hand, the law of demand states that if the prices are excessively high, only a few consumers will purchase the goods and when this happens demands will go unmet. To fully meet demands, the producers must charge a price in which case it is just enough so that consumers will be convinced to buy the goods and still there is profit to earn. Still, there are many other factors that affect the supply and demand causing them to alternately fluctuate. Markets are in persistent fluctuation as demands and supplies are subjected to changing driving forces and influences. These shifts play a serious role altering market equilibrium price points and volumes for products and services. Scarcity, or the overall accessibility of a certain material, is a central driving force for overall …show more content…
A rise in demand will shift price upwards and volume to the right, increasing the overall value relative to the earlier said equilibrium point. Alternately, a decrease in demand will shift price downwards and volume to the left, decreasing both measurements to realign equilibrium with a reduced demand. Demand shifts, just like supply shifts, are caused by a wide variety of factors, but largely revolve around drivers of consumer behavior and circumstances. Factors that affect the demand are usually the quality and price of a product. The amount of available alternatives, advertising and changes in the price of complementary products also affect its demand. For instance, if the price of a video game console falls, demand for games for that console may rise as more customers purchase the console and want games for it. Due to the demand curve sloping downward and the supply curve sloping upwards, they inadvertently will cross at some given point on any supply/demand chart. This equilibrium serves as a price and quantity turning