Demand, Supply and Market Equilibrium

Demand, grant and Market Equilibrium Every grocery has a lead side and a picture side and whither these two forces ar in reachiser it is said that the marts be at equilibrium. The Demand Schedule The Demand side can be be by police force of downward sloping implore bend dexter. When the expense of commodity is raised (ad former(a) things held constant), buyers scat to buy less of the commodity. Similarly when the price is depressed, other things being constant, metre demanded make ups. The above figure shows sum of money demanded at different prices.Here we can observe that the quantity demanded increases as the price decreases and vice versa keeping other things constant. This happens basically due to factors namely Income effect and substitution effect. Demands for any quantity is determined by trinity factors namely want for the commodity, will to buy the alike and ability to buy the same. A whole grade of factors determines how much would be the quantity woul d be demanded at a given price i. e. the other factors that ar mentioned above 1. Average income of the consumer 2. Size of the market . Prices and availability of related goods 4. Tastes and preferences of the consumer 5. Special influences Shift in demand trim down Vs Movement along Demand Curve or swap in Demand Vs Change in measuring stick Demanded A change in demand occurs when one of the elements underlying the demand curve slip-ups. For example if a person likes Pizzas and his income increases. So as his income increases he will demand more of pizzas withal if the prices of pizzas do not change. In other words, higher income level has resulted in higher demand for pizzas i. e. here ar a shift n the demand curve or change in demand. over again if the price of pizzas fall and other things viz. income of the consumer anticipates same. Again in that respect would rise in quantity demanded. This increase in quantity demanded is due to decrease in price. This change repre sents movement along demand curve or change in quantity demanded. Further this can be explained by the chase graph. Here we can observe that with increase in income level the consumer shifted to serial 2 and with decrease in price of the commodity he would move along the same demand curve in series one.The Supply Schedule Supply schedule shows the amount of a commodity that the handleer would like to passing play for sell at various prices. Supply curves are drawn on assumption of constant technology, and infix or resources (labour, land and capital) prices. The above curves shows amount of commodity that a supplier would like to sell at various prices. For example at a price of Re. 1 he does not wish to sell any quantity and at a price of Rs. 5 he would like to sell 18 units of the commodity. There are various factors effecting summate curve they are stated as follows 1. Technology . stimulant drug Prices 3. Prices of related goods 4. Government Policy 5. Special influences Shifts of Curves Vs Movement along the curves As is the case with the demand curve, supply curves in any case follow the same principal. Change in any of the above mentioned factors would cause a shift in curves and any change occurs due to change in price it is called movement along the curve. The same is shown down the stairs Equilibrium of Supply and Demand The market equilibrium comes at that price and quantity where the forces of supply and demand are in balance. At the equilibrium price amount that the uyer wants to buy is just equal to the amount that seller wants to sell. The reason we call this equilibrium is that when the forces of supply and demand are in balance, there is no reason for price to rise or fall, as long as other things remain unchanged. In economics equilibrium means that the different forces operating on a market are in balance, so the resulting price and quantity reconcile the desires of purchases and suppliers. Equilibrium can be shown and explained by the below mentioned graphical representation. The above graph shows at a price of Rs. 0, quantity demanded and supplied is 19 units. Any increase (or decrease) in price would result in fall (or rise) in demand, keeping the other things constant. Further the kindred between demand curve and supply curve are discussed as below Demand and Supply Shifts Effect on Price & beat If Demand rises Demand curve shifts to the right Price , Quantity If Demand falls Demand curve shifts to the left Price , Quantity If Supply rises Supply curve shifts to the right Price , Quantity If Supply falls Supply curve shifts to the left Price , Quantity When there is excess demand or excess supply, the market by determining the equilibrium price and quantities, allocates or rations out the scares goods among the possible uses. The market place through its interaction of supply and demand does the limit. This is rationing by the purse. When cell phones was launched in India cost of both handsets and cal l rates were high, infact even incoming calls were supercharged exuberantly. Then came Reliance with its dream of handing cell phones to each Indians.They came out with the concept of no charges for incoming calls and also came out with lower call rates as compared to the existing players it created an instant demand for its connections and hence captured major products and as a result all the existing players had to lower their tariffs matching to that of Reliance. Again the handsets were costly except Nokia came into the market with wide range of handsets and was instant hit. It captured the market initially. Recently we see Samsung coming out with lower ranged handsets with all the applications and features combined in its handsets at a lower price and creating a demand for its products.There are about exception to the theory of price and demand. There are few players in this industry which are exceptions viz. Blackberry and Apples i-phones. I-phones acts as an exception beca use of its features and the status and brand value it commands in the market. While Blackberry has a feature called BBM and its image as business phones due to which it acts an exception to the law of demand as irrespective of its price business class still demands it. We can say that the market works on the demand and supply structure but still there are some exceptions to these rules also as discussed above.