Supply and demand and price elasticity Essay Example | Topics and Well Written Essays - 3750 words

Supply and demand and expenditure elasticity - Essay ExampleThe key words in this definition ar ability and willingness. By ability we mean that the consumer must have enough income or resources to catch the hurts, and by willingness, it simple means that the buyer should want to buy the convergences. Only, if these two conditions are being satisfied, thus a satisfied demand is registered in the market. To be more meaningful, the quantities demanded at each price must related to a specific period- a day, a week, a month. Saying that a consumer wants to buy 10 packets of chocolate at $10/each is useless unless a specific time period is states.The higher up diagram and table reveals a fundamental characteristic of a demand. This characteristics states that as the prices falls, the quantity demanded rises and as price rises, the quantity demanded falls. In short, there is a negative or inverse relationship among the price and quantity demanded. In mathematical terms, there exis ts a negative or inverse relationship between the price and quantity demand, known as the law of demand.The basis behind this law of demand is com... In different words, price is an obstacle hat deters consumers from buying. Similarly, in any specific time period bulk will buy at a low price because it maximizes their diminishing marginal utility. There are two other reasons behind the law of demand. These are income effect and substitution effect. Income effect states that citizenry honor high purchasing power as prices decrease and hence buy more. The substitution effect, on the other hand, states that at a lower price, buyers will substitute what is now a less expensive product for similar products that are more expensive.The relationship between price and quantity demanded for any product offer be expressed as a simple graph, shown above.So, far our discussion of demand is for single and non for a market demand. Market demand is also similar to the concept of individual d emand. It involves add the quantities demanded by all consumers at each of the various possible and this will enable us to move from individual demand to market demand.PRICE FIRST BUYER second BUYER 3RD BUYER totality MARKET DEMAND043310522151012031ST BUYER2ND BUYER3RD BUYERMARKETp P PP + + =Q Q Q QThis was only the integrity side of market and tells us partly about the market condition. The other side of the market consists of people who want to sell the goods to the buyers in order to earn profits. Like demand, supply is a schedule or curve showing the amounts of a