Economics Supply and Demand Law

Posted on the June 29th, 2011 under Economics,General Business by admin

Understanding economics’ law of supply and demand is very important. You may not know it but the law of supply and demand is part of almost everything you do. In a market economy, all buyers and sellers are the deciding factors on what goods and services will be for sale and what the cost will be. More knowledge about this can give you more insights about your spending habits and behavior.

When you go to the mall to do some shopping, go to the grocery to purchase consumer goods or items, or go to the spa for relaxing massage service, you basically tell the stores what types of goods and services you are willing to spend on. In one of its simplest sense, this is called demand. This is a consumer’s willingness and ability to pay for his or her needed items or services.

Service providers and store owners have keen interest on demand. They observe what consumers buy in their stores and for how much and then use this information to decide what to offer in their stores. Whatever orders these store owners place on manufacturers are based on past observations of what you have purchased and also on what they think you are going to buy in the future. Simply put, this is supply. Supply is the amount of goods and services a seller provides for a particular time and place.

Supply and demand work hand in hand in a market economy. For the economy to become successful businesses simply have to sell and provide what consumers want and consumers, on the other hand, should be willing to spend on these goods and services.

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