The Law Of Supply And Demand - 880 Words

The law of supply and demand describes how prices will vary based on the balance between the supply of a product and the demand for that product (Wikipedia, 2005). If there is a balance between the supply, (the availability of the product), and the demand, (how much product the consumers want), then the price for the product would be considered good. If there is an imbalance, the price will change. According to Adam Smith, the invisible hand is a self-adjusting force in the market that corrects the price of a product through supply and demand (Colander, 2006). When a product is in short supply and there is significant demand for the product, the price will increase (Colander, 2006). When the quantity of the product is greater than the demand, the price will decrease (Colander, 2006). This assumes there exist a competitive marketplace. This process of price variability based on the supply of a good and the demand for it will continue until a balance is once again reached (Wikipedia, 2005). At that point, equilibrium is said to be established between the supply and the demand. Kirzner (2000) commented: The theory of supply and demand is recognized almost universally as the first step toward understanding how market prices are determined. Furthermore, this theory also explains how the price of a product shapes production and consumption decisions (Kirzner, 2000). Scarcity means there is less of something than is demanded or wanted (Investopedia Inc., 2005). For a nation,Show MoreRelatedLaws of Supply and Demand1244 Words   |  5 Pages Microeconomics and the Laws of Supply and DemandECO/365October 13, 2014Professor CoulibalyComedian P.J. O’Rourke said it best when he said, â€Å"microeconomics concerns things that economists are specifically wrong about, while macroeconomics concerns things economists are wrong about generally. Or to be more technical, microeconomics is about money you don’t have, and macroeconomics is about money the government is out of† (Beggs, 2014). On a serious note however, macroeconomics and microeconomicsRead MoreThe Law Of Supply And Demand980 Words   |  4 Pages What is the law of supply and demand? They are theories explaining an interaction between the supply of a source and a demand for that resource. The law of supply and demand defines the availability of a particular product and the demand for that product has on the price. If there is a lower supply and a higher demand, the price will be high, but the greater the supply and lower the demand, the lower the price will be for the product. 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The percentage of incomeRead MoreMicroeconomics and the Laws of Supply and Demand Essay703 Words   |  3 Pagesï » ¿ Microeconomics and the Laws of Supply and Demand ECO/365 Principles of Microeconomics August 18, 2014 Sam Pirnazar Microeconomics and the Laws of Supply and Demand Abstract The objective of the laws and the supply and demand simulation is to apply the supply and demand concepts to provide a better understanding on how to use the curves in order to figure out the equilibrium in the market for leasing two bedroom apartments. The simulation