Supply and Demand
Supply and Demand
Supply and Demand (pronunciation: suh-ply and dih-mand) is a fundamental concept in Economics that describes the relationship between the availability of a particular product and the desire or demand for that product by consumers.
Etymology
The term 'Supply and Demand' originates from the field of Economics. 'Supply' (from the Old French suppleer meaning "to fill up") refers to the amount of a product that producers are willing and able to sell at a certain price. 'Demand' (from the Old French demander meaning "to request") refers to the quantity of a product that consumers are willing and able to buy at a certain price.
Definition
In Economics, Supply and Demand is a model that explains how the price and quantity of goods and services are determined in a market. The law of supply states that, all else being equal, an increase in price results in an increase in the quantity supplied. Conversely, the law of demand states that, all else being equal, an increase in price results in a decrease in the quantity demanded.
Related Terms
- Market Equilibrium: The state in which the supply of an item is equal to its demand.
- Price Elasticity of Demand: A measure of the responsiveness of the quantity demanded to a change in price.
- Price Elasticity of Supply: A measure of the responsiveness of the quantity supplied to a change in price.
- Consumer Surplus: The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually do pay.
- Producer Surplus: The difference between the actual amount that a producer receives from the sale of a good or service and the minimum amount that he or she is willing to accept for it.
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