1.
The Theory
of Demand, Supply and Balance.
The theory of supply and demand
in economics, is the description of the relationships in the market, between
prospective buyers and sellers of a good. The supply and demand model is used
to determine the price and quantity sold in the market. This model is essential
for conducting microeconomic analysis of the behavior and interactions of
buyers and sellers. It is also used as a starting point for many other economic
models and theories. This model estimates that in a competitive market, the
price will serve as a counterweight between the quantity demanded by the
consumer and the quantity supplied by the producer, thus creating an economic
balance between price and quantity.
This model
accommodates the possibility of factors that can alter the balance, which will
then be displayed in the form of a shift from demand or supply. Supply
is the amount of goods or services available and can be
sold by the seller at various price levels, and at any given time. Several
factors that influence the supply are the price of the goods itself, the price
of production source, the level of production and the expectation / estimate.
While Demand is the amount of goods or services that want and can be purchased
by consumers, at various price levels, and at certain times. Some of the
factors that affect demand are the price of the good itself, the price of other
related goods, the level of income, the consumer's appetite and the expectation
/ estimate.
a. The law of demand (the low of demand) is essentially a hypothesis which states:"The re-
lationship between the goods demanded and the price of the goods where the relationship is in-
versely proportional to that when prices rise or rise then the amount of goods demanded will de-
crease and vice versa if the price drops the amount of goods Increased.
b. The Supply Law basically says that: "The higher the price of an item, the more the number
of items will be offered by the sellers. Conversely, the lower the price of an item, the less the qua-
ntity it offers. "
2.
Factors Affecting Demand and Supply
The demand of a
person or a society for a good is determined by many factors. Among the most
important factors are,
a. The price of the goods itself.
b. The price of other items that are substitutive of the goods.
c. Household income or community income.
d. One's taste or society.
e. Total population.
3.
Balance Price Pricing
In economics, the
equilibrium price or equilibrium price is the price formed at the point of
meeting the demand curve and the supply curve. The formation of price and
quantity of equilibrium in the market is the result of agreement between the
buyer (consumer) and the seller (producer) in which the quantity demanded and
the offered is equal. If this balance has been achieved, usually this balance
point will last long and become a benchmark of the buyer and the seller in
determining the price.
To determine the
state of market equilibrium we can combine demand tables and supply tables into
demand and supply tables. The state of market equilibrium can be determined by
combining the demand curve and the offer curve into the demand and supply
curve. The state of equilibrium can also be determined mathematically, ie by
solving the simultaneous or simultaneous demand and supply equations.
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