For every economic dispensation, there are masses of persons and establishments and to lessen variables to a controllable amount they are merged into these significant clusters which are families, companies and the central authorities (Lossa et al. 23). These are the actors of economic principle, and the platform on which they perform their paly is called the market. While demand is the quantity of commodities at a particular time which consumers (households) are not only willing to purchase but are able to purchase at the varying prices all factors remaining constant, supply is the amount of commodities at a particular time which suppliers or producers are keen and capable of putting in the marketplace for sale at different prices other factors affecting supply held constant.
Given that request is the quantity of a product or service buyers are eager and able to purchase at a given price, there are four types of demand namely competitive, joint or complementary claim, composite demand, and the derived demand. Competitive request emanates from the demand for substitute goods, and substitute goods are goods that serve the same purpose, therefore compete for the consumer’s income (Iossa et al. 28). Therefore, a variation in the worth of one affects the demand for the other. Joint or complementary request is the demand for goods that are consumed together like cars and fuel. Nevertheless, derived demand is the demand for a commodity that results from the demand of the final product, for instance, the demand for wood for manufacturing furniture. Finally, composite demand applies to commodities which have several uses or demanded several and different applications. A change in demand for one of them will affect all others.
The factors that affect the demand of a commodity may result into either move laterally along the demand schedule or shifts in the demand schedule. Importantly, all the determinants of demand other than the price causes shifts in the demand schedule, however, variations in the prices of commodities causes’ movement along demand curve (Iossa et al. 34). Nevertheless, the determinants of demand also result in numerous kinds of springiness of demand which may be price flexibility of demand, income elasticity, and cross flexibility of demand.
On the other hand, supply can either be individual supply or market supply. The possible quantities provided for sale at diverse prices by distinct firms for a commodity is the own supply while the combination of all supply schedules of firms within an industry makes the industry supply schedule (Iossa et al. 40). Typically, the supply schedule angles upwards starting left to right, which affirms the rule of supply “pointing that all other factors remaining constant, the greater the price, the greater the measure supplied in the market.”
The supply of commodities to the market, just like the demand of products depends on aspects that may either result in a shift in supply curve of movement along the supply schedule (Iossa et al. 36). These factors are; the commodities own price, a straight connection exists between amount provided and the price in that the greater the rate, the more people shall convey to the marketplace. Secondly, prices of other related goods e.g. substitute and complement goods also affect supply. When two products say, C and D are substitute goods an the cost of C upsurges, less of C will be demanded, meaning more of D will be required and subsequently increase in the supply of D. However, for complement goods, an rise in the price of a good jointly consumed with the other will lead to their common fall in demand and subsequently supply. Finally, the costs of factors of production also affect the supply of commodities as the prices of determinants of production used extensively to produce a good rise so do the firm’s costs. Eventually, the prices of goods rise leading to reduced demand and subsequently fall in supply.
Notably, there are some circumstances the slope of the supply schedule is opposite, these are exceptional supply curves. They may either be regressive supply or fixed supply. For the backward supply, the greater the price within a specific range, the lesser the amount suppliers are willing to offer in the marketplace (Iossa et al. 38). Mostly, it occurs in the labor market were above a certain degree, greater salaries have discouragement effects as the preference for leisure become high. However, where the commodity is infrequent, the supply remains constant irrespective of price.
Iossa, Elisabetta, and David Martimort. “The simple microeconomics of public‐private partnerships.” Journal of Public Economic Theory 17.1 (2015): 4-48.