Question

Does supply and demand laws apply to labor, capital, and land? Why or why not?

Answer 1

Throughout economics, supply and demand is linked to the quantity of a commodity which manufacturers want to sell at different prices and the quantity that buyers want to purchase. It is the primary framework used in economic theory of price determination. A commodity's price is determined by a market's relationship between supply and demand. The resulting value is called the cost of equilibrium and is an arrangement between producers and consumers of the good. The quantity of a good supplied by producers in equilibrium is equal to the quantity that consumers demand.

The quantity of a commodity sold on the market depends not only on the commodity's value, but also on potentially many other factors, such as alternative product prices, manufacturing technology, and the availability and cost of labor and other production factors. Analyzing demand in basic economic analysis involves looking at the relationship between different prices and the quantity theoretically provided by producers at each price, keeping all other variables that might affect the price constant again.

The market for a commodity may be inelastic if there are no near alternatives and if the product's expenditure constitutes only a small proportion of the consumer's income. Organizations facing relatively inelastic demands for their goods may raise their total income by increasing prices; companies facing elastic demands can not. Supply-and-demand analysis may be applied to markets for final goods and services or to markets for labour, capital, and other factors of production. It can be applied at the level of the firm or the industry or at the aggregate level for the entire economy.