Law of Su??l? ?nd D?m?nd D?finiti?n, Ex?l?in?d, Ex?m?l??

Law of Su??l? ?nd D?m?nd D?finiti?n, Ex?l?in?d, Ex?m?l?? Th? ?rin?i?l? ?f ?u??l? ?nd d?m?nd is one ?f th? m??t im??rt?nt ??n???t? in microeconomics. It h?l?? u? und?r?t?nd h?w ?nd wh? tr?n???ti?n? ?n m?rk?t? take ?l??? ?nd h?w ?ri??? are d?t?rmin?d.We have ?ll b??n in that ?itu?ti?n wh?r? th?r? i?n’t ?n?ugh ?f the product w? w?nt t? bu? in th? m?rk?t ?u?h that the ?ri?? in?r????? ?nd only th??? with more m?n?? can ?ff?rd to bu? th?m.T?k? f?r example, ?n ?u?ti?n, where too m?n? ????l? ?r? bidding for ?n antique product th?t is limit?d in numb?r ?? ??????d t? ?itu?ti?n? wh?r? there are just t?? many g??ds, but too f?w bu??rs.T?k? f?r example, th??? tim?? wh?n g?? w?? cheap because ?v?r? g?? ?t?ti?n h?d gas ?nd inother to ??ll, th?? h?d t? lower th? ?ri?? a bit in ?th?r to ??m??l customers to buy from them r?th?r th?n th? ??m??tit?r.All these ??n b? ?x?l?in?d by th? forces ?f d?m?nd and supply.Basically, wh?n a l?t ?f ????l? want a ?r?du?t that i? limit?d in supply, the ?ri?? goes u? as ??????d to when th?r? i? t?? mu?h of that ?r?du?t in t he m?rk?t th?t ??u??? sellers t? l?w?r th? price in ?th?r t? sell.Economics i? a ?tud? ?f market th?t comprises a group ?f buyers ?nd ??ll?r? of a particular ?r?du?t or ??rvi??.The w?rking? ?f th? m?rk?t ???t?m are governed b? th??? two f?r???, demand and ?u??l?.Th??? tw? f?r??? ?l?? a ?ru?i?l r?l? in d?t?rmining the ?ri?? of a ?r?du?t ?nd ?iz? of th? m?rk?t.“Th? demand f?r g??d? i? a ??h?dul? ?f th? ?m?unt? th?t buyers would be willing t? ?ur?h??? ?t ?ll possible prices at ?n? ?n? in?t?nt of tim?” Pr?f Mayers Demand r?f?r? to the willingness ?r ?bilit? of a bu??r t? ??? f?r a ??rti?ul?r ?r?du?t.In ?th?r w?rd? demand ??n be defined ?? th? ?u?ntit? of a ?r?du?t that a buyer desires t? purchase ?t a ????ifi? price and tim? ??ri?d.The d?m?nd f?r a product i? influ?n??d b? a number ?f f??t?r?, ?u?h ?? ?ri?? ?f th? product, ?h?ng? in customers’ ?r?f?r?n???, ?nd ?t?nd?rd ?f living.I? d?m?nd the ??m? ?? ?u?ntit? d?m?nd?d?In ???n?mi? t?rmin?l?g?, d?m?nd i? n?t th? same ?? quantity d? m?nd?d. When ???n?mi?t? t?lk ?b?ut d?m?nd, th?? m??n th? r?l?ti?n?hi? b?tw??n a range ?f ?ri??? ?nd the ?u?ntiti?? d?m?nd?d ?t th??? ?ri???, ?? illustrated by a d?m?nd ?urv? ?r a d?m?nd ??h?dul?. When ???n?mi?t? talk ?b?ut ?u?ntit? demanded, they m??n ?nl? a certain ??int ?n th? d?m?nd ?urv?, ?r ?n? quantity ?n th? d?m?nd ??h?dul?. In short, d?m?nd refers t? th? ?urv? ?nd ?u?ntit? demanded r?f?r? t? the (????ifi?) ??int on the curve.Th? d?m?nd f?r a ?r?du?t in th? market i? g?v?rn?d by th? law of d?m?nd, which states th?t th? demand f?r a product decreases with in?r???? in it? ?ri??? ?nd vi?? v?r??, whil? other f??t?r? r?m?in ??n?t?nt (All thing? being ??u?l).In th? market system, bu??r? constitute the d?m?nd f?r a ?r?du?t, whil? sellers r??r???nt th? supply ?id? of th? product in th? m?rk?t.Su??l? r?f?r? t? th? quantity ?f a ?r?du?t th?t a seller ?gr??? t? ??ll in the market ?t a particular price within a ????ifi? ??int ?f time.Th?r? ?r? various d?t?rmin?nt? ?f ?u??l?, in?luding pr ice ?f a ?r?du?t, ???t ?f ?r?du?ti?n, g?v?rnm?nt policies, ?nd t??hn?l?g?.Unlik? d?m?nd, the l?w ?f ?u??l? ?x?r????? the direct r?l?ti?n?hi? b?tw??n th? ?u??l? ?nd ?ri?? ?f a ?r?du?t, while ?th?r f??t?r? remain the ??m?.In ?im?l? w?rd?, th? law of ?u??l? ?t?t?? the ?u??l? of a product in?r????? with in?r???? in its ?ri?? ?th?r f??t?r? ?t constant.I? ?u??l? th? ??m? as ?u?ntit? ?u??li?d?In ???n?mi? terminology, ?u??l? is not th? same as ?u?ntit? ?u??li?d. Wh?n economists r?f?r to ?u??l?, they m??n the relationship b?tw??n a r?ng? of prices and the ?u?ntiti?? supplied ?t th??? ?ri???, a r?l?ti?n?hi? th?t ??n b? illu?tr?t?d with a ?u??l? ?urv? ?r a ?u??l? schedule. When economists r?f?r to ?u?ntit? ?u??li?d, they m??n ?nl? a ??rt?in ??int on th? supply ?urv?, or one quantity ?n th? ?u??l? ??h?dul?. In short, ?u??l? r?f?r? t? the ?urv? ?nd ?u?ntit? ?u??li?d r?f?r? t? th? (????ifi?) ??int ?n the ?urv?.Th? int?r??ti?n b?tw??n demand ?nd supply helps in d?t?rmining th? m?rk?t ??uilibrium ? ri?? ?f a product.E?uilibrium ?ri?? r?f?r? to th? price wh?r? the ?u?ntit? demanded of a product b? buyers i? ??u?l t? th? quantity supplied b? sellers.In other words, equilibrium ?ri?? i? a ?ri?? wh?n th?r? i? a b?l?n?? between m?rk?t demand ?nd supply.The ??uilibrium ?ri?? ?f a product ??n ?h?ng? du? to v?ri?u? ??nditi?n?, ?u?h ?? reduction in cost of ?r?du?ti?n, fall in th? price ?f substitutes, ?nd unf?v?r?bl? climatic conditions. C?n?um?r?In this ????, ??n?um?r? are all th? economic units th?t ?r? ??t?nti?ll? willing to bu? a ??rt?in g??d ?r ??rvi??.Th? ??tu?l demand f?r said g??d or ??rvi?? depends ?n diff?r?nt v?ri?bl??.For n?w w? will focus only on th? most im??rt?nt one, th? ?ri??. F?r most g??d? and ??rvi??? w? ??n ??? th?t demand will in?r???? as th? ?ri?? f?ll? ?nd vi?? v?r??.Thi? ??tu?ll? seems pretty ?bvi?u?: Ju?t think ?b?ut h?w many ????l? w?uld bu? a Ferrari if th?? w?r? not th?t ?x??n?iv?.ProducersProducers ?n the other h?nd are th? ones th?t ?r? ??t?nti?ll? willin g t? produce ?nd sell a ??rt?in g??d ?r ??rvi??.Th? ??tu?l ?u??l? again d???nd? on multiple v?ri?bl??, ??t ?? w? did before w? will focus only ?n th? ?ri?? for n?w. For m??t g??d? ?nd ??rvi??? thi? im?li?? that supply will decrease ?? the ?ri?? falls ?nd vi?? versa.Ag?in th? r????ning b?hind thi? i? r?th?r simple: If you w?r? to ??ll ice ?r??m ??u w?uld ?r?b?bl? try ?nd sell ?? much ?? ??u could if prices w?r? high, b???u?? you ??uld m?k? a good ?r?fit.H?w?v?r, if ?ri??? were t? fall (m??b? ?v?n b???nd ??ur ?r?du?ti?n cost) it w?uld not be ?r?fit?bl? to ??ll ice cream anymore ?nd you would ?r?du?? l???.S?m? ?f the m?n?g?m?nt ?x??rt? h?v? d?fin?d d?m?nd in th? f?ll?wing w???:A???rding t? Pr?f. B?nh?m,“Th? d?m?nd for ?n?thing, at a giv?n ?ri?? i? the ?m?unt ?f it whi?h will b? b?ught ??r unit of time at th? ?ri??.”A???rding to Prof Hibd?n,“D?m?nd m??n? th? v?ri?u? quantities ?f goods that w?uld b? purchased per time period at diff?r?nt prices in a giv?n m?rk?t.”From the ?f?r?m ?nti?n?d definitions, it ??n b? concluded th?t d?m?nd implies a d??ir? supported by an ?bilit? ?nd willingness ?f ?n individu?l to ??? f?r a ??rti?ul?r product.If ?n individual does n?t h?v? sufficient r???ur??? ?r ?ur?h??ing ??w?r t? buy a ??rti?ul?r ?r?du?t, th?n hi?/h?r d??ir? ?l?n? w?uld n?t b? r?g?rd?d ?? demand.For instance, if an individu?l desires t? ?ur?h??? a ?riv?t? j?t ?nd d??? not h?v? ?d??u?t? ?m?unt ?f money t? purchase that j?t, his/her d??ir? i? not ??n?id?r?d as demand f?r a ?riv?t? j?t, r?th?r it i? considered as wi?hful thinking or d?? dr??ming whi?h has n?thing t? d? with economics.Al??, if ?n ?fflu?nt individu?l d??ir?? to purchase a ?riv?t? j?t, but d??? not have willingn??? to ???nd th? m?n?? t? purchase th?t ?riv?t? j?t, th?n hi?/h?r d??ir? i? ?l?? not considered ?? d?m?nd b???u?? he d??? h?v? th? m?n?? but he doesn’t w?nt t? ???nd it.Th?r?f?r?, we ??n say that effective d?m?nd is th? d??ir? backed b? the ?ur?h??ing power ?nd willingn??? of ?n individu?l t ? ??? for a ??rti?ul?r product.An ?ff??tiv? d?m?nd h?? three ?h?r??t?ri?ti?? n?m?l?, d??ir?, willingness, and ?bilit? ?f ?n individu?l to ??? for a ?r?du?t.Th?r?f?r?, d?m?nd for a ?riv?t? j?t ??n ?nl? be ??n?id?r?d as d?m?nd if an ?fflu?nt m?n w?nt? t? bu? a j?t ?nd i? r??d? ?nd willing to spend hi? or h?r m?n?? buying it.Th? d?m?nd for a product i? ?lw??? d?fin?d in r?f?r?n?? to thr?? k?? f??t?r?, ?ri??, time, ?nd m?rk?t ?l???.These thr?? factors contribute a major ??rt in und?r?t?nding the ??n???t ?f demand. The omission of ?n? of th??? factors w?uld m?k? th? ??n???t ?f d?m?nd meaningless ?nd v?gu?.F?r ?x?m?l?, the ?t?t?m?nt, “th? demand for a milk product i? 200”. N?ith?r ??nv??? ?n? m??ning, nor d??? h?v? ?n? use f?r ???n?mi? analysis or bu?in??? d??i?i?n m?king.On th? ?th?r h?nd, the ?t?t?m?nt, “th? d?m?nd f?r milk i? 100 lit?r? ??r d?? ?t a ?ri?? of $4 ??r lit?r in N?w Y?rk Cit?.” provides a clear und?r?t?nding ?f d?m?nd. Supply and demand curves  Source: Macroeconomics in C?nt?xt, First Editi?n b? N?v? G. ?t ?l (M.E. Sh?r??, 2008)Ex???ti?n? t? th? l?w ?f ?u??l? ?nd demandHousing ?nd h??lth ??r? ?r? tw? ?x?m?l?? ?f h?w th? law ?f ?u??l? ?nd d?m?nd does n?t ?lw??? work th? w?? the t?xtb??k? say it should.H?r?? how this l?w is ?u?????d t? fun?ti?n: Wh?n th? demand f?r a g??d ?r service rises, th? fir?t thing that happens i? th?t ?ri??? go u?. This i? b???u??, f?r the m?m?nt, ?t l???t, demand ?x???d? ?u??l?, ?utting ??ll?r? in a ???iti?n t? r?i?? their prices so th?? can earn m?r? d?ll?r? per unit ??ld.However, th? more ?ri??? rise, the more g??d? ?r ??rvi??? will b? ?ff?r?d to bu??r?, since it is obviously m?r? ?r?fit?bl? t? so do. A? a result, n?t ?nl? will ??ll?r? ?r?fit? per unit go u?, ?ut?ut will ?l?? g? u? their ?v?r?ll earnings will, t??.A? th? ?u??l? ?f these g??d? ?nd ??rvi??? ri??? in r????n?? to th??? higher ?ri???, it ?ut? downward ?r???ur? on ?ri???, ?in?? supplies ?t?rt t? ?x???d d?m?nd. Ev?ntu?ll?, th??? ?ri??? come d?wn to a l?v?l that ?l??r? the market ?t th? new high?r level ?f demand ?nd ?v?r?thing i? ??????ti?.In th? ???? ?f h?u?ing ?nd health care, h?w?v?r, th? law ?f ?u??l? and demand does n?t ???r?t? quite as ?m??thl?. As a ??n???u?n??, th?r?? little t? restrain prices fr?m rising in these tw? key ???t?r? of ?ur economy.Th? r?t? ?f infl?ti?n in both sectors has historically b??n w?ll ?b?v? the ???? of ?ri?? hikes ?f just ?b?ut ?v?r?thing ?l?? in the consumers m?rk?t b??k?t because in b?th ?????, higher ?ri??? r??ulting fr?m ri?ing d?m?nd h?? not ?ui?kl? br?ught f?rth m?r? ?u??li??. This i? due t? th? unusual nature ?f these indu?tri??.In th? ???? ?f h??lth ??r?, ?? ??u can im?gin?, it t?k?? years t? gr?du?t? n?w d??t?r?, build new h???it?l?, ?r d?v?l?? new drug?. Thi? is tru? n? matter how fast ?ri??? ri??.Wh?n it ??m?? t? housing, it t?k?? a whil? b?f?r? build?r? ??n ?ut t?g?th?r a ??r??l ?f l?nd, ???ur? th? necessary building ??rmit?, ????mbl? constructi on ?r?w? ?nd ?ur?h??? needed building ?u??li??.And this i? f?r new homes, which ????unt f?r ?nl? ?b?ut ?n? out ?f ?v?r? ?ix homes sold in th? U.S.Exi?ting h?m?? t?k? ?v?n l?ng?r to respond to ri?ing ?ri???, ?in?? th? decision t? ??ll ?n?? h?m? tends to be b???d more on ?u?h f??t?r? ?? job ?h?ng??, desires f?r a n?w lifestyle, divorce or death.Sim?l? put, people ?r? n?t g?ing to ?ut their homes ?n th? m?rk?t ju?t b???u?? it? w?rth m?r?, ?in?? th?? need a ?l??? to liv? (?lth?ugh, ?? w? ?ll know b? now, they h?v? l??rn?d t? t?? thi? in?r????d v?lu? vi? a h?m?-??uit? l??n).A? a result, ?ri??? of b?th h?u?ing ?nd h??lth care tend rise quickly wh?n d?m?nd picks up, ?nd th?? r?m?in high ?v?n ?ft?r ?u??li?? ?v?ntu?ll? expand.But th?r?? ?n? k?? diff?r?n?? b?tw??n h?u?ing ?nd h??lth care, when it comes t? r????nding t? the l?w of ?u??l? and demand.A? we h?v? b??n ???ing f?r th? past ??u?l? ?f ???r?, it i? ????ibl? f?r th? ?u??l? ?f housing t? ?v?r?h??t the demand. S? f?r, w? have not h?d ?u?h a d?v?l??m?nt ???ur in h??lth care. Th?t? wh? h?u?ing ?ri??? ?r? f?lling t?d?? whil? h??lth ??r? costs continue t? ???r.SHIFTS IN DEMAND AND SUPPLY FOR GOODS AND SERVICES Pri?? i? n?t th? only thing that influ?n??? d?m?nd. Nor i? it the ?nl? thing th?t influ?n??? ?u??l?.F?r ?x?m?l?, h?w i? d?m?nd f?r v?g?t?ri?n food affected if, ???, h??lth concerns cause more ??n?um?r? t? avoid ??ting m??t?Or h?w i? th? ?u??l? ?f di?m?nd? ?ff??t?d if di?m?nd producers di???v?r ??v?r?l n?w di?m?nd mines?Wh?t ?r? th? m?j?r f??t?r?, in ?dditi?n t? th? ?ri??, th?t influ?n?? d?m?nd ?r supply?What F??t?r? Aff??t D?m?nd?W? defined d?m?nd ?? the amount of ??m? ?r?du?t a ??n?um?r i? willing and able t? ?ur?h??? ?t ???h price.Th?t ?ugg??t? at l???t tw? f??t?r? in ?dditi?n to ?ri?? th?t ?ff??t demand. Willingn??? t? ?ur?h??? ?ugg??t? a d??ir?, b???d ?n what economists call t??t?? ?nd preferences.If you n?ith?r n??d n?r w?nt ??m?thing, you will not buy it.Ability to ?ur?h??? suggests th?t in??m? i? im??rt?nt. Professors ?r? u?u?ll? ?bl? t? ?ff?rd b?tt?r h?u?ing ?nd transportation th?n students, because th?? have m?r? in??m?. Pri??? of related goods can ?ff??t d?m?nd ?l??.If ??u n??d a n?w ??r, th? ?ri?? ?f a H?nd? m?? ?ff??t your d?m?nd for a Ford. Fin?ll?, th? ?iz? ?r ??m???iti?n ?f th? ???ul?ti?n ??n affect d?m?nd. Th? m?r? children a f?mil? h??, th? gr??t?r th?ir demand f?r clothing. Th? m?r? driving-?g? children a f?mil? h??, th? gr??t?r th?ir d?m?nd f?r ??r insurance, and th? less for diapers and b?b? f?rmul?.Th??? factors m?tt?r b?th for d?m?nd b? an individual ?nd demand by th? m?rk?t as a wh?l?. Exactly h?w do th??? v?ri?u? f??t?r? affect d?m?nd, ?nd h?w d? w? show the effects graphically?To ?n?w?r th??? questions, we n??d th? ??t?ri? ??ribu? ???um?ti?n.The C?t?ri? Paribus A??um?ti?nA d?m?nd ?urv? ?r a ?u??l? ?urv? i? a r?l?ti?n?hi? between tw?, ?nd only two, v?ri?bl??: ?u?ntit? ?n th? h?riz?nt?l ?xi? ?nd ?ri?? ?n th? vertical ?xi?.Th? assumption behind a demand ?urv? ?r a suppl y curve i? th?t n? r?l?v?nt ???n?mi? f??t?r?, other th?n th? ?r?du?t’? ?ri??, ?r? changing.E??n?mi?t? ??ll thi? assumption ??t?ri? ??ribu?, a L?tin phrase m??ning “?th?r things being ??u?l.”An? giv?n demand ?r supply ?urv? i? based ?n the ceteris ??ribu? ???um?ti?n that ?ll else i? held ??u?l.A demand ?urv? or a ?u??l? ?urv? is a r?l?ti?n?hi? b?tw??n two, and only tw?, v?ri?bl?? wh?n ?ll ?th?r v?ri?bl?? ?r? k??t ??n?t?nt. If ?ll ?l?? i? n?t h?ld equal, then the l?w? of ?u??l? ?nd d?m?nd will not n??????ril? h?ld.Oth?r f??t?r? That Influence th? D?m?nd ?f G??d? and ServicesTh? d?m?nd ?h?ng?? ?? a result ?f ?h?ng?? in ?ri??, ?th?r f??t?r? d?t?rmining it b?ing h?ld ??n?t?nt. W? ?h?ll explain below in detail h?w th??? other f??t?r? d?t?rmin? market demand for a ??mm?dit?.Th??? other f??t?r? d?t?rmin? th? position or l?v?l of demand ?urv? ?f a ??mm?dit?.It may b? n?t?d th?t wh?n th?r? i? a change in th??? non-price f??t?r?, the whole curve ?hift? rightward ?r l?ftw?rd ?? the ???? m ?? b?.The f?ll?wing f??t?r? d?t?rmin? m?rk?t d?m?nd for a ??mm?dit?.i. T??t?? ?nd Preferences ?f the ConsumersAn important f??t?r which d?t?rmin?? th? demand f?r a good is the t??t?? and ?r?f?r?n??? of the consumers f?r it.A g??d for which ??n?um?r?’ t??t?? ?nd preferences are greater, its d?m?nd w?uld b? l?rg? ?nd it? demand ?urv? will therefore li? ?t a higher l?v?l. People’s t??t?? ?nd preferences for v?ri?u? g??d? often ?h?ng? ?nd ?? a r??ult there i? ?h?ng? in d?m?nd f?r th?m.Th? changes in d?m?nd f?r various g??d? ???ur du? t? th? ?h?ng?? in f??hi?n and also due to the pressure ?f ?dv?rti??m?nt? b? the m?nuf??tur?r? ?nd sellers ?f diff?r?nt ?r?du?t?.On th? ??ntr?r?, wh?n ??rt?in g??d? go out of f??hi?n ?r ????l?’? t??t?? ?nd ?r?f?r?n??? n? l?ng?r r?m?in favourable to th?m, th? d?m?nd f?r th?m decreases.ii. Income ?f th? P???l?The d?m?nd f?r goods ?l?? d???nd? u??n th? incomes of the ????l?. Th? greater th? incomes ?f th? ????l?, th? greater will b? th?ir demand for g??d? .In dr?wing th? d?m?nd ??h?dul? ?r th? d?m?nd ?urv? f?r a good w? t?k? in??m? ?f th? ????l? as given and ??n?t?nt.Wh?n ?? a result ?f the rise in the in??m? ?f the ????l?, th? d?m?nd increases, th? wh?l? of the d?m?nd ?urv? ?hift? u?w?rd ?nd vice versa.The gr??t?r income means th? gr??t?r ?ur?h??ing power. Therefore, when in??m?? ?f th? ????l? increase, th?? ??n afford to bu? more. It is b???u?? ?f thi? r????n th?t in?r???? in in??m? has a ???itiv? ?ff??t on th? demand f?r a good.Wh?n the incomes ?f th? people f?ll, they w?uld demand l??? ?f a good ?nd ?? a r??ult th? d?m?nd ?urv? will shift d?wnw?rd.F?r in?t?n??, as a r??ult of ???n?mi? gr?wth in Indi? th? incomes ?f th? people h?v? greatly increased owing to the l?rg? inv??tm?nt ?x??nditur? ?n th? d?v?l??m?nt ??h?m?? by th? Government ?nd th? ?riv?t? ???t?r.As a r??ult ?f thi? in?r???? in incomes, th? d?m?nd f?r good grains ?nd ?th?r consumer g??d? h?? gr??tl? in?r????d.Likewise, wh?n b???u?? ?f dr?ught in a ???r the ?gri?ultur? p roduction gr??tl? falls, th? in??m?? ?f th? farmers decline.A? a result ?f th? d??lin? in incomes ?f th? f?rm?r?, th?? will demand l??? ?f the ??tt?n ?l?th ?nd ?th?r m?nuf??tur?d ?r?du?t?.iii. Changes in Pri??? ?f the R?l?t?d G??d?Th? d?m?nd f?r a g??d is ?l?? ?ff??t?d b? th? ?ri??? ?f ?th?r goods, especially those whi?h ?r? related t? it as substitutes ?r ??m?l?m?nt?.When we dr?w th? d?m?nd schedule ?r the demand curve for a good w? t?k? th? ?ri??? of th? related goods ?? r?m?ining constant.Th?r?f?r?, wh?n the ?ri??? of the related goods, substitutes ?r ??m?l?m?nt?, ?h?ng?, th? wh?l? d?m?nd curve would change its ???iti?n; it will ?hift u?w?rd ?r d?wnw?rd ?? th? ???? m?? b?.When the ?ri?? ?f a substitute f?r a g??d f?ll?, th? d?m?nd f?r th?t good will d??lin? ?nd when th? price ?f the substitute ri???, th? demand for th?t good will in?r????.F?r ?x?m?l?, wh?n price ?f tea ?nd in??m?? ?f the ????l? remain the ??m? but the ?ri?? of coffee f?ll?, the ??n?um?r? w?uld demand l??? ?f t?? than before. Tea ?nd ??ff?? ?r? v?r? ?l??? ?ub?titut??.Th?r?f?r?, wh?n ??ff?? b???m?? ?h????r, th? ??n?um?r? substitute ??ff?? for t?? ?nd ?? a result the d?m?nd f?r t?? d??lin??. For g??d? whi?h are complementary with each other, a fall in th? ?ri?? of ?n? ?f them w?uld f?v?r?bl? ?ff??t the d?m?nd f?r th? ?th?r.F?r instance, if price ?f milk falls, th? d?m?nd for ?ug?r w?uld ?l?? b? f?v?r?bl? affected. Wh?n people would t?k? more milk, th? d?m?nd f?r ?ug?r will ?l?? in?r????. Lik?wi??, when the ?ri?? of cars falls, th? ?u?ntit? d?m?nd?d ?f them would in?r???? whi?h in turn will in?r???? the demand f?r ??tr?l.iv. Advertisement ExpenditureAdvertisement expenditure m?d? b? a firm t? ?r?m?t? th? ??l?? of it? product i? ?n im??rt?nt f??t?r d?t?rmining demand for a ?r?du?t, especially ?f th? ?r?du?t ?f th? firm which gives advertisements.Th? ?ur???? ?f advertisement i? to influence the ??n?um?r? in favour ?f a product. Adv?rti??m?nt? ?r? given in v?ri?u? m?di? such ?? n?w?????r?, radio, ?nd television.Adv?rti??m?nt? for g??d? ?r? repeated ??v?r?l tim?? ?? that consumers ?r? ??nvin??d ?b?ut their superior quality.When ?dv?rti??m?nt? prove ?u?????ful th?? ??u?? an in?r???? in th? demand f?r the ?r?du?t.v. Th? Number ?f C?n?um?r? in th? M?rk?tTh? m?rk?t demand f?r a commodity is obtained b? ?dding u? th? individu?l d?m?nd? ?f th? present ?? well as ?r?????tiv? ??n?um?r? ?f a g??d at v?ri?u? possible ?ri???. The gr??t?r th? numb?r ?f consumers of a g??d, th? gr??t?r the m?rk?t demand f?r it.N?w, th? question arises ?n what f??t?r? th? numb?r of ??n?um?r? f?r a g??d d???nd?. If th? ??n?um?r? ?ub?titut? ?n? good f?r ?n?th?r, th?n the number of ??n?um?r? f?r th? g??d whi?h h?? been substituted b? the other will d??lin? ?nd f?r the g??d which h?? been u??d in place of th? others, th? numb?r of consumers will in?r????.B??id??, wh?n the seller of a g??d ?u????d? in finding ?ut n?w m?rk?t? f?r his good and ?? a r??ult the m?rk?t f?r his good ?x??nd? the numb?r of ??n?um?r? f? r th?t good will in?r????.An?th?r im??rt?nt ??u?? for th? in?r???? in th? numb?r ?f ??n?um?r? i? the gr?wth in population.F?r in?t?n??, in India th? d?m?nd for m?n? ????nti?l g??d?, especially f??d grains, has in?r????d because ?f the in?r???? in the ???ul?ti?n ?f th? ??untr? ?nd th? resultant increase in the number ?f ??n?um?r? f?r th?m.vi. C?n?um?r?’ Ex???t?ti?n? with R?g?rd t? Futur? Pri???Another f??t?r whi?h influences the d?m?nd for goods is ??n?um?r?’ ?x???t?ti?n? with r?g?rd to futur? ?ri??? ?f th? goods.If du? to ??m? reason, ??n?um?r? ?x???t that in th? n??r future ?ri??? ?f th? goods w?uld ri??, th?n in th? ?r???nt th?? w?uld d?m?nd greater ?u?ntiti?? ?f the g??d? so th?t in th? future they should not have t? pay higher ?ri???.Similarly, when the consumers ?x???t th?t in th? futur? th? prices ?f g??d? will f?ll, th?n in th? ?r???nt they will postpone a part ?f the ??n?um?ti?n of g??d? with th? r??ult th?t th?ir ?r???nt d?m?nd for g??d? will d??r????. Shifts in the demand and supply curve  Source: Macroeconomics in C?nt?xt, First Editi?n b? N?v? G. ?t ?l (M.E. Sh?r??, 2008)In?r???? in D?m?nd ?nd Shifts in D?m?nd CurveWh?n demand changes du? t? the f??t?r? ?th?r th?n price, th?r? i? a ?hift in the wh?l? demand ?urv?.A? mentioned ?b?v?, apart fr?m ?ri??, demand f?r a ??mm?dit? i? d?t?rmin?d b? in??m?? ?f th? ??n?um?r?, his t??t?? and ?r?f?r?n???, ?ri??? ?f r?l?t?d g??d?.Thu?, wh?n there is ?n? change in th??? f??t?r?, it will cause a ?hift in d?m?nd ?urv?.For ?x?m?l?, if incomes ?f the consumers in?r????, ??? du? t? th? hik? in th?ir w?g?? and ??l?ri?? or due t? th? gr?nt ?f dearness ?ll?w?n??, they will d?m?nd more ?f a good, ??? cloth, at ???h ?ri??.Thi? will cause a shift in the demand ?urv? t? the right.Simil?rl?, if preferences ?f the ????l? f?r a ??mm?dit?, say ??l?ur TV, b???m? gr??t?r, th?ir d?m?nd f?r colour TV will in?r????, that i?, th? d?m?nd curve will ?hift t? the right and, therefore, at ???h price they will d?m?nd m ?r? ??l?ur TV.Th? ?th?r im??rt?nt factor whi?h ??n cause an in?r???? in d?m?nd f?r a ??mm?dit? is th? ?x???t?ti?n? ?b?ut future ?ri???.If people expect that ?ri?? ?f a commodity i? likely t? go u? in futur?, they will tr? t? ?ur?h??? the ??mm?dit?, especially a dur?bl? ?n?, in th? ?urr?nt ??ri?d whi?h will boost th? ?urr?nt demand f?r the goods ?nd ??u?? a shift in th? d?m?nd curve t? the right.A? ???n ?b?v?, th? prices ?f r?l?t?d ??mm?diti?? ?u?h as substitutes ?nd complements ??n ?l?? change the d?m?nd f?r a commodity.For example, if the ?ri?? ?f coffee rises other f??t?r? r?m?ining th? ??n?t?nt, this will ??u?? the d?m?nd f?r t??, a substitute f?r ??ff??, t? increase ?nd its demand curve t? ?hift t? the right.D??r???? in Demand ?nd Shift in the D?m?nd Curv?If th?r? ?r? ?dv?r?? ?h?ng?? in the f??t?r? influ?n?ing d?m?nd, it will lead to the d??r???? in d?m?nd ??u?ing a ?hift in th? d?m?nd ?urv?.F?r ?x?m?l?, if due to in?d??u?t? r?inf?ll agricultural productions in a year declines t hi? will ??u?? a f?ll in the in??m?? ?f th? f?rm?r?. Thi? fall in??m?? ?f the f?rm?r? will ??u?? a decrease in th? d?m?nd f?r indu?tri?l products, say cloth, ?nd will r??ult in a ?hift in th? d?m?nd ?urv? to th? l?ft.Simil?rl?, ?h?ng? in preferences for ??mm?diti?? ??n ?l?? affect th? demand. F?r example, when ??l?ur TV? ??m? to Indi? people’s greater preference for them l?d t? the in?r???? in th?ir d?m?nd. But thi? br?ught about d??r???? in d?m?nd for bl??k ?nd whit? TV? causing l?ftw?rd ?hift in d?m?nd curve f?r th??? bl??k ?nd white TV?.Th? d??r???? in d?m?nd d??? not ???ur du? to the rise in ?ri?? but du? t? th? ?h?ng?? in other d?t?rmin?nt? ?f demand.Decrease in d?m?nd for a commodity m?? ???ur due t? the f?ll in th? ?ri??? ?f its ?ub?titut??, rise in the prices ?f ??m?l?m?nt? of th?t commodity ?nd if th? people expect that ?ri?? of a g??d will f?ll in futur?.Other f??t?r? that ?ff??t Su??l? ?f a Pr?du?t other th?n just ?ri??In economics, ?u??l? refers t? the ?u?ntit? of a ?r ?du?t available in th? m?rk?t f?r ??l? at a ????ifi?d ?ri?? at a giv?n ??int ?f time.Unlik? demand, ?u??l? r?f?r? to th? willingn??? of a seller to ??ll th? ????ifi?d amount of a product within a ??rti?ul?r ?ri?? ?nd tim?.Su??l? i? ?lw??? defined in relation t? price ?nd tim?. F?r ?x?m?l?, if a ??ll?r agrees t? sell 500 kg? ?f wh??t, it ??nn?t b? considered ?? supply ?f wh??t ?? the ?ri?? and tim? f??t?r? ?r? mi??ing.Simil?rl?, if a ??ll?r i? r??d? to ??ll 500kgs at a price of 10$ per kg then ?g?in it w?uld n?t b? ??n?id?r?d ?? ?u??l? as the tim? ?l?m?nt i? missing. Th?r?f?r?, th? ?t?t?m?nt “a ??ll?r is willing to ??ll 500kgs ?t th? ?ri?? ?f 10$ ??r kg in a w??k” i? id??l t? understand th? ??n???t ?f ?u??l? as it r?l?t?? ?u??l? with ?ri?? ?nd time.Apart from thi?, the ?u??l? ?l?? d???nd? ?n th? ?t??k ?nd m?rk?t price ?f th? product. St??k ?f a ?r?du?t r?f?r? t? ?u?ntit? of a ?r?du?t available in th? market f?r ??l? within a ????ifi?d ??int ?f tim?.B?th ?t??k ?nd m?rk?t ?ri?? ?f a ?r?du?t ?ff??t it? ?u??l? t? a greater ?xt?nt. If the market ?ri?? is m?r? than th? ???t price, th? ??ll?r w?uld in?r???? th? ?u??l? of a ?r?du?t in the m?rk?t. However, th? d??r???? in market ?ri?? ?? ??m??r?d to cost ?ri?? would r?du?? th? ?u??l? ?f product in the m?rk?t.F?r example Mr. X h?? 100kg? of a product. He ?x???t? the minimum ?ri?? to be 30$ ??r kg ?nd th? m?rk?t price i? 35$ per kg.Therefore h? w?uld r?l???? ??rt?in ?m?unt ?f th? product, ??? ?r?und 50kg? in th? m?rk?t, but w?uld not r?l???? the wh?l? ?m?unt.Th? reason b?ing h? would w?it for b?tt?r rates for hi? ?r?du?t. In such a ????, th? ?u??l? ?f hi? ?r?du?t would b? 50kgs at 35$ ??r kg.Determinants ?f Su??l?Supply ??n be influenced by a number ?f f??t?r? that ?r? t?rm?d ?? determinants of ?u??l?. G?n?r?ll?, the ?u??l? of a ?r?du?t depends ?n it? ?ri?? ?nd cost ?f ?r?du?ti?n. In ?im?l? t?rm?, ?u??l? i? th? fun?ti?n ?f ?ri?? and ???t of ?r?du?ti?n.Some ?f th? factors th?t influ?n?? the supply ?f a ?r?du?t ?r? desc ribed ?? f?ll?w?:i. PriceR?f?r? t? the m?in f??t?r th?t influ?n??? the ?u??l? ?f a ?r?du?t t? a gr??t?r ?xt?nt. Unlik? d?m?nd, th?r? i? a direct r?l?ti?n?hi? b?tw??n the price of a ?r?du?t and it? supply.If th? ?ri?? ?f a product in?r?????, then th? supply ?f the ?r?du?t also in?r????? and vi?? v?r??. Change in ?u??l? with respect to th? change in price i? t?rm?d ?? th? v?ri?ti?n in supply of a ?r?du?t.Speculation about futur? price can also ?ff??t th? supply ?f a ?r?du?t. If th? ?ri?? ?f a product is ?b?ut t? ri?? in future, th? supply ?f the product w?uld d??r???? in th? ?r???nt m?rk?t b???u?? of the profit ?x???t?d by a ??ll?r in futur?.However, th? f?ll in th? ?ri?? ?f a ?r?du?t in future w?uld in?r???? the ?u??l? of ?r?du?t in th? ?r???nt market.ii. Co?t ?f Pr?du?ti?nIm?li?? th?t th? supply ?f a ?r?du?t w?uld d??r???? with in?r???? in th? cost ?f ?r?du?ti?n ?nd vi?? versa. The ?u??l? ?f a product ?nd ???t of ?r?du?ti?n ?r? inv?r??l? related t? ???h ?th?r. F?r example, a ??ll?r w?uld supply less ?u?ntit? of a ?r?du?t in th? m?rk?t, wh?n th? ???t ?f production exceeds th? m?rk?t ?ri?? ?f the ?r?du?t.In ?u?h a case th? ??ll?r w?uld wait f?r the rise in ?ri?? in future. Th? ???t ?f ?r?du?ti?n ri??? du? t? ??v?r?l f??t?r?, such ?? l??? of f?rtilit? of l?nd, high wage r?t?? of l?b?r, ?nd in?r???? in the ?ri??? ?f raw material, tr?n???rt cost, ?nd tax rate.iii. N?tur?l C?nditi?n?Implies th?tclimatic conditions dir??tl? ?ff??t the ?u??l? ?f ??rt?in products.For ?x?m?l?, th? ?u??l? of ?gri?ultur?l products in?r????? when m?n???n ??m?? ?n time.H?w?v?r, th? supply ?f these products decreases at the time ?f dr?ught. Some ?f th? ?r??? ?r? ?lim?t? specific ?nd th?ir gr?wth ?ur?l? depends ?n ?lim?ti? ??nditi?n?.iv. TechnologyRefers to ?n? of th? important determinant of ?u??l?. A b?tt?r ?nd ?dv?n??d t??hn?l?g? in?r????? th? ?r?du?ti?n ?f a ?r?du?t, whi?h r??ult? in th? in?r???? in the ?u??l? of th? ?r?du?t.F?r example, th? ?r?du?ti?n of f?rtiliz?r? ?nd good ?u?lit? seed s increases th? ?r?du?ti?n ?f crops.Thi? further in?r???? th? ?u??l? ?f f??d gr?in? in th? m?rk?t.v. Tr?n???rt ConditionsRefer to th? f??t th?t b?tt?r transport f??iliti?? in?r???? th? ?u??l? of products. Tr?n???rt is ?lw??? a ??n?tr?int t? th? supply ?f ?r?du?t?, ?? th? products ?r? not ?v?il?bl? ?n tim? du? to ???r tr?n???rt facilities. Th?r?f?r? even if th? price ?f a product in?r?????, th? ?u??l? would n?t in?r????.In Indi? ??ll?r? u?u?ll? u?? road tr?n???rt ?nd th? poorly m?int?in?d r??d m?k?? it difficult t? reach the destination ?n tim? th? products that ?r? manufactured in ?n? part ?f th? ?it? n??d to b? spread in th? wh?l? ??untr? thr?ugh r??d tr?n???rt.Thi? may r??ult in th? d?m?g? of m??t ?f th? ?r?du?t? during th? journey, which ??n ??u?? h??v? l??? for a seller. In ?dditi?n th? ??ll?r ??n also lose hi?/h?r customers b???u?? ?f th? delay in. the d?liv?r? ?f products.vi. Factor Prices ?nd th?ir Av?il?bilit?A?t ?? ?n? ?f the m?j?r determinant of ?u??l?. Th? in?ut?, ?u?h ?? raw m?t?ri?l m?n, ??ui?m?nt, ?nd machines, r??uir?d ?t the time ?f ?r?du?ti?n are t?rm?d as f??t?r?.If th? factors ?r? ?v?il?bl? in ?uffi?i?nt ?u?ntit? and ?t lower price, th?n there w?uld b? in?r???? in ?r?du?ti?n.This would in?r???? the ?u??l? of a ?r?du?t in th? m?rk?t. F?r ?x?m?l?, availability of ?h??? l?b?r and raw material nearby th? manufacturing plant ?f an ?rg?niz?ti?n w?uld h?l? in r?du?ing th? labor and tr?n???rt?ti?n ???t?.Consequently, the production and supply of the ?r?du?t w?uld in?r????.vii. G?v?rnm?nt’? P?li?i??Im?li?? th?t the diff?r?nt ??li?i?? ?f g?v?rnm?nt, ?u?h ?? fiscal ??li?? ?nd indu?tri?l policy, has a greater impact ?n the ?u??l? ?f a ?r?du?t.For ?x?m?l?, in?r???? in t?x ?n duti?? would decrease th? ?u??l? ?f a ?r?du?t.On the other h?nd, if th? tax r?t? i? low, then th? supply ?f a ?r?du?t w?uld increase.viii. Pri??? of Related G??d?R?f?r t? fact th?t th? ?ri??? ?f ?ub?titut?? ?nd ??m?l?m?nt?r? goods ?l?? ?ff??t th? supply ?f a product.For ?x?m?l?, if the ?ri?? of wh??t increases, th?n f?rm?r? would t?nd t? gr?w more wheat th?n n??.Thi? w?uld decrease the supply of rice in the m?rk?t.EQUILIBRIUM WHERE DEMAND AND SUPPLY INTERSECTBecause th? graphs f?r d?m?nd and ?u??l? ?urv?? b?th h?v? ?ri?? on th? v?rti??l ?xi? ?nd ?u?ntit? ?n th? h?riz?nt?l axis, the d?m?nd ?urv? ?nd supply ?urv? for a ??rti?ul?r good ?r ??rvi?? ??n ?????r ?n th? ??m? gr??h.Together, demand ?nd supply d?t?rmin? the ?ri?? ?nd the ?u?ntit? that will b? b?ught and sold in a market. Source: Macroeconomics in C?nt?xt, First Editi?n b? N?v? G. ?t ?l (M.E. Sh?r??, 2008)R?m?mb?r thi?: When tw? lin?? on a di?gr?m cross, thi? intersection u?u?ll? means ??m?thing. The point where the ?u??l? ?urv? (S) and th? d?m?nd ?urv? (D) cross, designated by ??int E i? ??ll?d th? equilibrium.Th? ??uilibrium ?ri?? i? th? ?nl? ?ri?? where the plans ?f ??n?um?r? ?nd th? ?l?n? ?f ?r?du??r? agreeâ€"that i?, wh?r? the amount ?f the ?r?du?t consumers w?nt t? bu? (?u?ntit? d?m?nd?d) i? equal t? the ?m?unt producers w?nt t? sell (?u?ntit? supplied).Thi? ??mm?n ?u?ntit? is ??ll?d the equilibrium quantity. At ?n? other ?ri??, th? ?u?ntit? d?m?nd?d d??? n?t equal th? ?u?ntit? ?u??li?d, so th? m?rk?t i? n?t in equilibrium at th?t ?ri??.Th? equilibrium price i? $1.40 per gallon ?f g???lin? and th? ??uilibrium ?u?ntit? is 600 million g?ll?n?.If ??u h?d ?nl? th? d?m?nd ?nd ?u??l? ??h?dul??, and n?t th? gr??h, ??u ??uld find th? equilibrium b? l??king f?r th? ?ri?? l?v?l on the t?bl?? wh?r? th? qua ntity d?m?nd?d ?nd th? ?u?ntit? supplied ?r? ??u?l.Th? word “??uilibrium” means “balance.” If a m?rk?t i? ?t it? ??uilibrium price and ?u?ntit?, th?n it has n? reason t? move away from th?t ??int. H?w?v?r, if a market i? n?t at ??uilibrium, th?n economic ?r???ur?? ?ri?? t? m?v? th? market toward th? equilibrium ?ri?? ?nd th? equilibrium ?u?ntit?.Im?gin?, for ?x?m?l?, th?t the ?ri?? ?f a g?ll?n ?f g???lin? was ?b?v? the ??uilibrium ?ri??â€"th?t i?, instead ?f $1.40 per g?ll?n, the ?ri?? i? $1.80 per g?ll?n. This above-equilibrium ?ri?? i? illustrated b? the d??h?d horizontal lin? at th? price ?f $1.80.At this high?r price, th? ?u?ntit? d?m?nd?d dr??? fr?m 600 t? 500. Thi? decline in ?u?ntit? r?fl??t? how consumers r???t t? the high?r price b? finding w??? to use l??? gasoline.Moreover, ?t thi? high?r ?ri?? of $1.80, th? ?u?ntit? of g???lin? ?u??li?d rises fr?m the 600 to 680, ?? th? higher price makes it m?r? ?r?fit?bl? f?r gasoline producers t? expand th?ir output.N?w, ??n?i d?r how ?u?ntit? d?m?nd?d and ?u?ntit? ?u??li?d i? r?l?t?d ?t thi? ?b?v?-??uilibrium ?ri??.Quantity demanded has fallen t? 500 g?ll?n?, whil? quantity supplied h?? ri??n to 680 g?ll?n?. In f??t, ?t ?n? above-equilibrium price, th? ?u?ntit? supplied ?x???d? the ?u?ntit? d?m?nd?d. W? ??ll thi? ?n excess ?u??l? or a ?ur?lu?.With a ?ur?lu?, gasoline ???umul?t?? at g?? stations, in tanker tru?k?, in pipelines, and ?t ?il refineries. Thi? ???umul?ti?n ?ut? pressure on gasoline ??ll?r?. If a ?ur?lu? remains un??ld, those firm? inv?lv?d in m?king ?nd ??lling g???lin? are n?t r???iving ?n?ugh ???h to pay th?ir w?rk?r? and to ??v?r their ?x??n???.In this ?itu?ti?n, some producers ?nd ??ll?r? will want t? ?ut prices, because it i? better t? ??ll ?t a lower ?ri?? th?n n?t t? sell at ?ll.Once some sellers start cutting ?ri???, ?th?r? will f?ll?w t? ?v?id losing ??l??. Th??? price r?du?ti?n? in turn will ?timul?t? a higher quantity demanded.S?, if th? ?ri?? i? ?b?v? th? ??uilibrium l?v?l, incenti ves built into th? ?tru?tur? ?f d?m?nd and ?u??l? will create pressures for the ?ri?? to f?ll t?w?rd th? equilibrium.Now ?u????? that the ?ri?? i? below its equilibrium l?v?l ?t $1.20 per g?ll?n, ?? th? d??h?d h?riz?nt?l lin? ?t this price.At thi? l?w?r ?ri??, th? quantity d?m?nd?d in?r????? from 600 t? 700 as drivers t?k? longer trips, spend m?r? minutes w?rming up th? car in th? driv?w?? in wint?rtim?, stop ?h?ring rid?? to work, and buy l?rg?r ??r? th?t g?t f?w?r miles t? th? g?ll?n.H?w?v?r, th? below-equilibrium price r?du??? g???lin? ?r?du??r?’ incentives to ?r?du?? ?nd ??ll gasoline, and the ?u?ntit? ?u??li?d f?ll? fr?m 600 to 550.When th? ?ri?? i? b?l?w ??uilibrium, th?r? i? excess d?m?nd, ?r a ?h?rt?g?â€"th?t i?, ?t th? given ?ri?? th? ?u?ntit? demanded, which has b??n ?timul?t?d by the l?w?r price, n?w ?x???d? the quantity ?u??li?d, whi?h h?d been d??r????d b? the l?w?r price. In thi? ?itu?ti?n, ??g?r gasoline bu??r? mob the g?? ?t?ti?n?, ?nl? t? find m?n? ?t?ti?n? runnin g short ?f fuel.Oil ??m??ni?? ?nd gas stations recognize th?t th?? h?v? ?n opportunity t? m?k? high?r profits by ??lling what g???lin? they have ?t a high?r ?ri??. A? a r??ult, th? ?ri?? rises t?w?rd th? ??uilibrium level.