Cocktail Party Economics: The Relation Between Supply And Demand

In an economic structure, there is need of buyers and sellers to keep the market alive. In a market, there are two concepts, which are supply and demand.

Sellers are responsible for supplying the products as well as services, while the buyers demand for them. As stated in the Cocktail Party Economics (Eveline J. Adomait,

Richard G. Maranta Pg.30), supply and demand consist of costs and benefits.

Supply includes marginal cost that is the lowest price that producers are willing to sell. In addition to that, supply shows a relationship between the price of a good and the quantity supplied that producers aim to sell during the anticipated time.

In this case, increase in price forces consumers to demand less and sellers to supply more. For suppliers,

Consequently, the quantity demanded increased 250,000 barrels a day

(http://www.wsj.com/articles/global-oil-demand-closing-in-on-supply-executives-say-

1473256871).

Considering the relation between the supply and the demand, we can state that they are in interaction with one and other. When the quantity demanded equals to the quantity supplied, there is an intersectıon point, which is called ‘the equilibrium’, means that both buyers and the sellers have a desired situation (Pg.88). However, if the prices rise, there is an excess supply, which results in a ‘producer surplus’. On the other hand, if the prices drop, the consumers will plan to buy more and it will cause an excessive demand, which referred as ‘consumer surplus’. When the shortage occurs producers increase their prices to reach the equilibrium that makes fall in the quantity demanded. Taking all the facts into consideration, we observe that there are buyers and sellers in a market economy. Firms that supply the services and products manufacture the goods depending on the buyers’ demand, and when the quantity demanded