Question

1. in no more than five(5) lines of typed text below this question, define the Economics term "DEMAND", describe how it is graphically illustrates, and specifically identify two changes in market circumstances that might result in decrease in DEMAND. Be specific.

2. in no more than five(5) lines of typed text below this question, define the Economics term "SUPPLY", describe how it is graphically illustrates, and specifically identify two changes in market circumstances that might result in decrease in SUPPLY. Be specific.

Answer 1

1.Demand- In economics, the term 'Demand' describes the quantity of a goods or services that a consumer is willing to buy at a certain price. The 'law of demand' states that other things being equal, with increase in price of a good or service, consumer demand for that good or service decreases, i.e. there is a negative relationship between change in price and change in demand. The relationship between this price and quantity demanded is known as demand curve which is a downward sloping line that proves the 'law of demand'. A Shift in demand (increase or decrease ) takes place due to these following factors:

• Consumer Preferences, expectations, Income

• change in price of related goods

• Change in no. Of buyers

So, we can conclude that if Price of a Complementary goods for good 1 increase, demand for good 1 will decrease and if price of substitute good for good 1 decrease, demand for good 1 will decrease. Also, decrease in consumers income will cause decrease in demand for good.

2. Supply - Supply is the amount of goods that sellers are willing to sell at various given prices at a certain time or, Supply can also be described as amount of products that is available for purchase at any specified prices. According to Law of Supply, there is a positive relationship between price and quantity i.e. with increase in price, quantity supplied also increases. Therefore, Supply curve is a positively sloped line which illustrates this positive price-quantity relationship. Two factors that can decrease supply are-

• Increase in price of input which increases the cost of production, can decrease the supply of the final good

• Poor natural conditions for production .