Demand, Supply and Market Price
NCERT Class 11 • Statistics for Economics and Introductory Microeconomics • Chapters on demand and supply | NCERT Class 12 • Introductory Microeconomics
Demand, Supply and Market Price
Demand is the quantity of a good that buyers are willing and able to purchase at a given price in a given period. Supply is the quantity sellers are willing to offer at that price. The price at which the two are equal is the equilibrium price, and this is how a market settles a price on its own.
The Law of Demand and Supply
- The law of demand says that, other things remaining the same, a fall in price raises the quantity demanded and a rise in price lowers it.
- The demand curve therefore slopes downward from left to right.
- Demand depends on the price of the good, income of the buyer, prices of related goods, tastes and expectations.
- Substitute goods such as tea and coffee move demand in the same direction as the other's price; complementary goods such as car and petrol move it in the opposite direction.
- The law of supply says that, other things remaining the same, a rise in price raises the quantity supplied.
- The supply curve therefore slopes upward from left to right.
- Supply depends on price, cost of production, technology, taxes and the number of sellers.
Equilibrium and Elasticity
- Equilibrium occurs where the demand curve and supply curve intersect; there is no tendency for price to change.
- If price is above equilibrium there is a surplus, and sellers cut price; if it is below, there is a shortage, and price is bid up.
- Elasticity of demand measures how strongly quantity demanded responds to a change in price.
- Demand is elastic when a small price change causes a large quantity change, as with luxuries.
- Demand is inelastic when quantity barely changes, as with salt and essential medicine.
| Change | Effect on Demand Curve |
|---|---|
| Rise in buyer income | Shifts right for a normal good |
| Rise in price of a substitute | Shifts right |
| Rise in price of a complement | Shifts left |
| Change in own price | Movement along the same curve |
Equilibrium price — the price at which the quantity demanded equals the quantity supplied.
Hindi me samjhein
वस्तु की अपनी कीमत बदलने पर उसी वक्र पर गति होती है। आय या अन्य कारक बदलने पर पूरा वक्र खिसक जाता है। यही मांग में गति और मांग में परिवर्तन का अंतर है।
Exam me kaise aata hai
- The demand curve slopes — downward from left to right
- Price where demand equals supply is — equilibrium price
- Tea and coffee are — substitute goods
- Demand for salt is — inelastic
UPSC/State PSC ke liye
- A change in the good's own price causes movement along the curve, while a change in any other determinant shifts the whole curve.
- Elasticity matters for tax policy, since a tax on an inelastic good raises revenue without cutting consumption much.
Yahan confuse hote hain
✗ The supply curve slopes downward | The supply curve slopes upward | ✓
✗ A rise in income moves along the demand curve | It shifts the whole demand curve | ✓
✗ All goods have elastic demand | Essentials like salt have inelastic demand | ✓
Ek nazar me
- Law of demand: price up, quantity demanded down.
- Law of supply: price up, quantity supplied up.
- Equilibrium is where the two curves intersect.
- Elastic demand responds strongly to price; inelastic demand barely does.