What is demand?
Demand is the willingness or the want of a consumer to purchase a determined goods and services. An effective demand is happens when the consumers have the purchasing power to buy commodities at different prices.
Demand Curves
The amount of a good or service willing to be bought is known as quantity demanded.
Individual demand is the demand for only one customer.
For example, my demand for written articles per month is the following:
Price --> Quantity
$10 --> 1
$9 --> 2
$8 --> 3
$7 --> 3
$6 --> 3
$5 --> 5
$4 --> 5
$3 --> 7
$2 --> 9
$1 --> 20
$0.50 --> 50
Demand Curves: Elastic and Inelastic
This is an inelastic demand curve. This means that the price elasticity of demand for this product is less than 1. For a 1 unit change in price, a less amount of demand would change too.
Example
Price for oil: $50
Demand for oil: 1000 litres
Total revenue: $50000
Price for oil: $65
Demand for oil: 975 litres
Total revenue: $63375
On the other hand, an elastic curve for demand would mean that a unit change for the price of the product would involve a higher change in quantity demanded
Example
Price for chocolate: $10
Demand for chocolate: 10000 units
Total revenue: $100000
Price for chocolate: $8
Demand for chocolate: 15000 units
Total revenue: $120000
In this example, if you were a chocolate producer, you would be interested in lowering the price in order to punch in $20000 more revenue.
What is supply?
Supply is the word used in economics for the amount of a determined good or service willing to be produced and sold at a different range of prices. The amount of goods and services willing to be produced is called quantity supplied.
The higher the price of the product, the more profit a firm will make and the higher it's willingness to supply.
Market price
The market price of a product is simple to understand. It is where at a determined price, supply and demand will meet.
Example for e-books:
SUPPLY AT EACH PRICE:
At $1: 1000 e-books
At $2: 1700 e-books
At $3: 2400 e-books
At $4: 3100 e-books
At $5: 4800 e-books
DEMAND AT EACH PRICE
At $1: 5600 e-books
At $2: 4000 e-books
At $3: 2400 e-books
At $4: 1900 e-books
At $5: 700 e-books
And so the market price for this e-book would be of 3 dollars!
See How to increase demand for a product
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1 comments:
very interesting and complete tutorial. Please finish writing the last step to conclude this hard-worked section of the webpage.
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