Demand And Demand Essay

In economics, one particular arresting feature is the price effect on demand and supply. With the aim of making commodity and service market balance, demand and supply should tend to be balanced. That is economic equilibrium. Market equilibrium is the situation where quantity supplied and quantity demanded of a specific commodity are equal at the certain price level. As the diagram shows below, at price1 quantity supplied is more than quantity demanded, a surplus occurs. That means producers cannot sell all the products because of the small demand of market. Then price will start to fall. At price 2, quantity demanded is more than quantity supplied, a shortage occurs. In this situation, more products will be made because producers have pursuit

One factor is the increase of income rate. As the diagram shows below, it results the demand curve shift from D to D1. When people get more income, more money will be available for them to spend. Since the purchase power of customers improves, the demand of them increases as well. Make luxury handbags as the example. If a woman earns five hundred pounds per month, she may not be willing to buy a handbag in expensive price because she need to keep life going. But if this woman gets a higher salary of one thousand pounds or even more per month, or she wins a lottery in big amounts, she will be more willing to buy a luxury handbag. Thus the demand of luxury handbags will increase. As the movement of demand curve a shortage will occur. A new equilibrium will appear until the price moves from P to P1. And the quantity will rise from Q to

According to the diagram below, the supply curve shift from S to S1, which raises price but reduces output. When people purchase goods, not only the product itself need to be considers, but also other products that is related to it. Make instance of tea and teapot. If the price of tea rises or the output of tea decreases, the number of people who drinks tea will lessen. Except the situation of teapot collection, teapots are just accessories of tea. Now that people drink tea less, the sales volume and profits of teapots will decline. Thereby, producers will cut down the output of teapots. As the movement of supply curve a shortage occurs. Since the price rises from P to P1, a new equilibrium will appear. And the quantity will decreases from Q to