Economics · Chapter 13
Study notes aligned to the official NEB syllabus.
Demand is the quantity of a good consumers are willing and able to buy at a given price, in a given time and place; mere desire for a good is not demand, it must be backed by purchasing power. The law of demand, as stated by Alfred Marshall, says that other things remaining the same, quantity demanded rises when price falls and falls when price rises, an inverse relationship shown by a downward-sloping demand curve. It holds only when related prices, income, tastes, population and price expectations stay constant; if any of these shift, the whole curve moves rather than just sliding along itself. Besides its own price, demand depends on the price of related goods, disposable income, tastes and fashion, expectations, population, the nature of the good, technology, and taxation.
Supply is the quantity of a good producers are willing and able to offer for sale at a given price over a given period. The law of supply says that, other things constant, quantity supplied rises with price and falls as price falls, so price and quantity supplied move together, giving an upward-sloping supply curve. This can be limited by perishability, regulation, the pull of more profitable alternative goods, or rising production costs. Supply also depends on input prices, the prices of alternative goods a firm could produce, the firm's objective, technology, taxes and subsidies, regulation, the number of sellers, and price expectations.