Demand, Supply and Market Equilibrium

Demand, release and Market Equilibrium every(prenominal) market place has a remove berth and a return side and where these two forces are in balance it is said that the markets are at symmetricalness. The Demand Schedule The Demand side tolerate be delineate by lawfulness of downward sloping beg rick. When the bell of good is raised (ad other things held perpetual), buyers tend to buy less of the commodity. Similarly when the cost is lowered, other things being constant, measuring pauperizationed step-ups. The supra figure shows quantity submited at different prices.Here we can observe that the quantity penuryed increases as the price decreases and un unspoiledeousness versa keeping other things constant. This happens basi chit-chaty due to factors namely Income effect and electric switch effect. Demands for totally quantity is determined by three factors namely indirect request for the commodity, will to buy the same and ability to buy the same. A firm array of factors determines how much would be the quantity would be demanded at a given price i. e. the other factors that are mentioned above 1. Average income of the consumer 2. sizing of the market . Prices and availability of colligate goods 4. Tastes and preferences of the consumer 5. Special influences Shift in demand flex Vs Movement on Demand Curve or throw in Demand Vs Change in Quantity Demanded A motley in demand occurs when one of the elements underlying the demand crape shifts. For congressman if a person likes Pizzas and his income increases. So as his income increases he will demand more of pizzas even if the prices of pizzas do not change. In other words, higher(prenominal) income level has resulted in higher demand for pizzas i. e. here are a shift n the demand distort or change in demand. again if the price of pizzas fall and other things viz. income of the consumer remains same. Again there would rebellion in quantity demanded. This increase in quantity deman ded is due to decrease in price. This change represents movement along demand curve or change in quantity demanded. Further this can be explained by the following graph. Here we can observe that with increase in income level the consumer shifted to series 2 and with decrease in price of the commodity he would move along the same demand curve in series one.The Supply Schedule Supply schedule shows the enumerate of a commodity that the deal erupter would like to offer for sell at various prices. Supply curves are drawn on assumption of constant technology, and input or resources (labour, land and capital) prices. The above curves shows amount of commodity that a supplier would like to sell at various prices. For example at a price of Re. 1 he does not wish to sell any quantity and at a price of Rs. 5 he would like to sell 18 units of the commodity. There are various factors effecting impart curve they are stated as follows 1. Technology . Input Prices 3. Prices of related goods 4. Government Policy 5. Special influences Shifts of Curves Vs Movement along the curves As is the circumstance with the demand curve, supply curves as well as follow the same principal. Change in any of the above mentioned factors would cause a shift in curves and any change occurs due to change in price it is called movement along the curve. The same is shown below Equilibrium of Supply and Demand The market equilibrium comes at that price and quantity where the forces of supply and demand are in balance. At the equilibrium price amount that the uyer wants to buy is just peer to the amount that seller wants to sell. The reason we call this equilibrium is that when the forces of supply and demand are in balance, there is no reason for price to rise or fall, as long as other things remain unchanged. In economics equilibrium means that the different forces operating on a market are in balance, so the resulting price and quantity constitute the desires of purchases and suppliers. Eq uilibrium can be shown and explained by the below mentioned graphical representation. The above graph shows at a price of Rs. 0, quantity demanded and supplied is 19 units. whatever increase (or decrease) in price would result in fall (or rise) in demand, keeping the other things constant. Further the relationship between demand curve and supply curve are discussed as below Demand and Supply Shifts Effect on Price & Quantity If Demand rises Demand curve shifts to the right Price , Quantity If Demand falls Demand curve shifts to the left Price , Quantity If Supply rises Supply curve shifts to the right Price , Quantity If Supply falls Supply curve shifts to the left Price , Quantity When there is superabundance demand or excess supply, the market by determining the equilibrium price and quantities, allocates or rations out the scares goods among the possible uses. The market place through its interaction of supply and demand does the rationing. This is rationing by the purse. Wh en cell phones was launched in India cost of both handsets and call rates were high, infact even inclimax calls were charged exuberantly. Then came Reliance with its woolgather of handing cell phones to each Indians.They came out with the concept of no charges for incoming calls and too came out with lower call rates as compared to the existing players it created an minute demand for its connections and hence captured major products and as a result all the existing players had to lower their tariffs matching to that of Reliance. Again the handsets were costly but Nokia came into the market with wide range of handsets and was instant hit. It captured the market initially. Recently we see Samsung coming out with lower ranged handsets with all the applications and features combined in its handsets at a lower price and creating a demand for its products.There are some riddance to the theory of price and demand. There are few players in this persistence which are excommunications v iz. Blackberry and Apples i-phones. I-phones acts as an exception because of its features and the status and brand value it commands in the market. While Blackberry has a feature called BBM and its image as business phones due to which it acts an exception to the law of demand as irrespective of its price business class chill out demands it. We can say that the market works on the demand and supply structure but still there are some exceptions to these rules also as discussed above.