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Supply and demand

  • The phrase supply and demand was first used in the mid-eighteenth century, though the concept goes back thousands of years. We will examine the definition of the expression supply and demand, where it came from and some examples of its use in sentences.


     

    Supply and demand is a description of the relationship between the availability of goods and the desire for those goods in a society. Often referred to as the law of supply and demand, it is an economic theory that explains where the law of supply and the law of demand intersect. The law of supply states that the higher the price of a commodity, the greater the supply. High prices and greater profits give suppliers an incentive to increase production. The law of demand states that the higher the price of an item, the less consumer demand. These two ideas intersect in the idea of supply and demand, which explains the microeconomics of a competitive model of a market economy. An excess of demand in a competitive market may result in a shortage of product quantity in the market and high profit, especially for any company that has a monopoly on the sector.  Supply side excess occurs when a producer surplus is greater than the quantity demanded by the public. A glut of goods, or surpluses in inventories, occur when there is a change in the quantities demanded by the public. This may be because a competitor has entered the free market, one who has learned how to control costs and can offer the goods at a lower price. The market may have become saturated, meaning there are fewer consumers who need the particular goods and services. Consumer preferences and tastes may be shifting, with diminishing interest in the product. Other market forces may be in play, such as a recession, a change in the labor market, or a shift in other factors of production. The law of supply and demand is one of the fundamental principles of economics in a capitalist society. When demand or consumption is greater than goods available to sell, the market price will increase. When there is a change in demand resulting in excess supply, the price will decrease. Market equilibrium or an equilibrium price is achieved when supply and demand are equal. The term supply and demand was first used by James Denham-Steuart in his work Inquiry into the Principles of Political Economy, published in 1767. The term supply and demand was popularized by the economist Adam Smith in the book The Wealth of Nations, published in 1776. The economic principle has long been understood, as it was expounded in the Tirukkural, written at least 1500 years ago.

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    Examples

    Call this attitude “Left NIMBYism.” Left NIMBYism not only flatly contradicts the logic of supply and demand but also flies in the face of empirical studies of what happens when cities see new construction. (The Washington Post)

    Saudi Arabia will quietly add extra oil to the market over the next couple of months to offset a drop in Iranian production but is worried it might need to limit output next year to balance global supply and demand as the United States pumps more crude. (Reuters)

    Therefore, any significant disruption in that supply chain has the potential to dramatically impact world supply and demand. (The High Plains Journal)

    “This is a time of year when Texans normally see gas prices fall, but concerns about global supply and demand are causing oil prices to increase along with retail gas prices,” said Daniel Armbruster, AAA Texas/AAA New Mexico spokesman. (The Plainview Daily Herald)


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