Difference between the Law of Supply and Demand
Definition
Law of Demand
An economic law stating that as the price of a good or service increases, the quantity demanded decreases, and vice versa.
In my own words: In the law of demand the higher the price, the lower the demand and the lower the price, the higher the demand.
Law of supply
An economic law stating that as the price of a good or service increases, the quantity supplied increases, and vice versa
In my own word: How much of something is available. It's clearly the opposite of the law of demand. The higher the price, the higher the supply and the lower the price, the lower the supply.
The relationship between the law of supply and demand is as demand increases the price goes up, which attracts new suppliers who increase the supply bringing the price back to normal.
If demand increases and supply remains unchanged, a shortage occurs. If demand decreases and supply remains unchanged, a surplus occurs. If demand remains unchanged and supply increases, a surplus occurs. If demand remains unchanged and supply decreases, a shortage occurs
For a market economy to function, producers must supply the goods that consumers want. This is known as the law of supply and demand. Supply refers to the amount of goods a market can produce, while demand refers to the amount of goods consumers are willing to buy.
Example: You are selling a candy bar for 5 dollars and you have 100 everyone is buying it; people orders a lot. Then you increase the price of your candy, now people are buying less. So as the price goes up, there is less demand and as the price decreases, the demand increases.
Together, these two powerful market forces form the main principle that underlies all economic theory.Clearly the law of supply is the opposite of the law of demand.This way they can maximize profits.
Summary: The law of supply and demand explains why people behave in certain ways within a market economy, and can even be used to predict behavior and, there by, economic outcomes.Consumers want to pay as little as they can. They will buy more as the price drops. Sellers, on the other hand, want to be able to charge as much as they can. They will be willing to make more and sell more as the price goes up.
An economic law stating that as the price of a good or service increases, the quantity demanded decreases, and vice versa.
In my own words: In the law of demand the higher the price, the lower the demand and the lower the price, the higher the demand.
Law of supply
An economic law stating that as the price of a good or service increases, the quantity supplied increases, and vice versa
In my own word: How much of something is available. It's clearly the opposite of the law of demand. The higher the price, the higher the supply and the lower the price, the lower the supply.
The relationship between the law of supply and demand is as demand increases the price goes up, which attracts new suppliers who increase the supply bringing the price back to normal.
If demand increases and supply remains unchanged, a shortage occurs. If demand decreases and supply remains unchanged, a surplus occurs. If demand remains unchanged and supply increases, a surplus occurs. If demand remains unchanged and supply decreases, a shortage occurs
For a market economy to function, producers must supply the goods that consumers want. This is known as the law of supply and demand. Supply refers to the amount of goods a market can produce, while demand refers to the amount of goods consumers are willing to buy.
Example: You are selling a candy bar for 5 dollars and you have 100 everyone is buying it; people orders a lot. Then you increase the price of your candy, now people are buying less. So as the price goes up, there is less demand and as the price decreases, the demand increases.
Together, these two powerful market forces form the main principle that underlies all economic theory.Clearly the law of supply is the opposite of the law of demand.This way they can maximize profits.
Summary: The law of supply and demand explains why people behave in certain ways within a market economy, and can even be used to predict behavior and, there by, economic outcomes.Consumers want to pay as little as they can. They will buy more as the price drops. Sellers, on the other hand, want to be able to charge as much as they can. They will be willing to make more and sell more as the price goes up.