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Demand and Supply
Demand is the quantity of goods that wish to buy at each price. Other things equal, at lot prices the
demanded quantity is higher. Supply is the quantity of goods that sellers wish to sell at each price.
Other things equal, when prices are high, the supplied quantity is high as well.
The market is in equilibrium when the price regulates the quantity supplied by producers and the
quantity demanded by consumers. When prices are not so high as the equilibrium price, there is excess
demand (storage) raising the price. At prices above the equilibrium price, there is excess supply
(surplus) reducing the price. There are some factors influencing demand for good, such as the prices of
other goods, consumer incomes and some others.
As consumer income is increased, demand for a normal good will also increase but demand for an
inferior good will decrease. A normal good is a good for which demand increases when incomes rise.
An inferior good is a good for which demand falls when incomes rise.
As to supply, some factors are assumed as constant. Among them are technology, the input price,
as well as degree of government regulation. An improvement in technology is as important for
increasing the supplied quantity of good as a reduction in input prices.