To understand the relationship between supply and demand, there are certain things which need to be inculcated primarily before that. First of all, lets discuss What is demand and supply. Demand and Supply are the most integral and vast concept or you can say the backbone of the economic world or the market.
Demand - Demand refers to the quantity of certain goods and services desired by the consumers in the market
Supply- Supply refers to the quantity of certain goods and services which are provided to the market place by the desired suppliers of the market.
Moving further, there exists certain laws which are the major backbone in the working of the economy. Following are the two laws-
The law of Demand : The Law of Demand states “ There exists inverse relationship between the prices of the goods in accordance with its demand.” Which means, that as the prices of the goods rise, the demand on the other hand will fall. For eg. If the price of the bread increases from ₹20 to ₹50, the demand for the same will fall after an increase of ₹30 in its prices. As a result, people will automatically avoid buying the same product. In accordance with this, Demand curve is downward sloping from left to right.
The law of Supply : The Law of Supply states “ There exists a direct relationship between prices of the goods and services in accordance with its supply.” Which means as the price of the goods rise, the supply for the same will also rise. Suppliers or the Producers will be more encouraged as compared to earlier to supply the product in the market. For eg. If the price of a pen increases from ₹60 to ₹100, the supply for the same will also increase after an increase of ₹40 in its prices. As a result, producer will feel motivated to produce more. In accordance with this, Supply curve is upward sloping from left to right.
