Abdul Rahman Afzal

UNIVERSITY OF AGRICULTURE, MULTAN

Supply, Demand and
Market
Contents
Demand and Supply................................................................................................... 2
Demand:............................................................................................................... 2
Law of demand:..................................................................................................... 2
Supply:................................................................................................................. 2
Market:................................................................................................................ 3
 Demand and Supply

Demand:
The amount of a particular economic good or service that a consumer will want to purchase at
a given price.
The demand curve is usually downward sloping, since consumers will want to buy more as
price decreases.

Law of demand:
The law of demand is a microeconomic law that states, all other factors being equal, as the
price of a good or service increases, consumer demand for the good or service will decrease,
and vice versa.
Graph-I Graph-II

Supply:
Supply is a fundamental economic concept that describes the total amount of a specific good
or service that is available to consumers.

Law of supply:
Law of supply states that other factors remaining constant, price and quantity supplied of a
good are directly related to each other. In other words, when the price paid by buyers for a
good rises, then suppliers increase the supply of that good in the market.
Graph-I Graph-II
Market:
An actual or nominal place where forces of demand and supply operate, and where buyers
and sellers interact to trade goods, services, or contracts or instruments, for money.
Graph-I Graph-II

The
higher
the price,
the more
suppliers

are likely to
produce.

Conversely, buyers tend to purchase more of a product the

lower its price. The relationship between the supply and demand for a good and changes in
price is called elasticity. Goods that are inelastic are relatively insensitive to changes in price,
whereas elastic goods are very responsive to price. A classic example of an inelastic good (at
least in the short term) is energy. Consumers require energy to get to and from work and to
heat their houses. It may be difficult or impossible in the short term for them to buy cars or
houses that are more energy efficient. On the other hand, demand for many goods is very
sensitive to price. Think steak. If the price of steak rises, consumers may quickly buy a
cheaper cut of beef or switch to another meat. Steak is an elastic good.