Demand
Demand is the quantity of a product that consumers are willing and able to purchase at a particular price at a given point in time.
Demand vs Want vs Need
- Need - necessity. Something that is required to survive or to sustain. For example, food, water, shelter etc.
- Want - desires. Things without which we can survive, but we need them for higher satisfaction. For example, an iPhone.
- Demand - willing and able to buy. things that you want to buy/consume and your pocket allows its consumption.
Demand curve
- As the price is cheaper, the quantity demand increases (or expansion). Conversely, as the price is more expensive, the quantity demand decreases (or contraction).
Law of demand
There is a negative correlation of the relationship between quantity and the price for demand. This is the fundamental law of demand.
Namely, at a higher price consumers will demand a lower quantity of a good.
Supply
Supply refers to the quantity of a good or service that businesses are willing and able to offer for sale at a given price, at a given point in time.
Law of supply
- At a higher price will induce producers to supply a higher quantity to the market.
- There is a positive correlation of the relationship between quantity and the price for supply.
- This is the fundamental Law of Supply.
The interaction of demand and supply
The point at which the demand and supply curve intersect is called market equilibrium. Price mechanism refers to the forces of demand and supply in determining the price and quantity of a good / service.