Supply And Demand In Economics

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Supply and demand is a tool used in Economics to describe, and show, how an economy functions. Supply and demand is used to show how prices are determined. Demand exists when an individual or group desires a good or service to the point where they are willing to pay or trade for it. The amount of a good or service purchased at a certain price is known as the quantity demanded. (Pg. 74) When the price of a good increases, consumers tend to respond by purchasing less of the good or something else, such as a substitute to that specific good. As price goes up, the quantity demanded goes up. When a price goes down, the quantity demanded goes up. The inverse relationship between the price and the quantity is known as the law of demand (p. 76). A table that shows the relationship between quantity demanded and price is known as a Demand schedule. (p. 76) The demand schedule is used to graph the Demand curve. The demand curve is the graph that shows the relationship of law of demand. The demand curve is often drawn as a straight line, with price on the Y-Axis and quantity demanded on the X-Axis. An increase in demand will show by a shift to the right of the demand curve, while a decrease in demand leads to a shift to the left. Market demand is the sum of all the individual quantities demanded at each price. Demand is increased when more individuals enter the market. An instance where more …show more content…

According to Geoff Riley, “Seasonal demand refers to fluctuations in output and sales related to the seasonal of the year. For most products there will be seasonal peaks and troughs in production and/or sales.” An example would be that during the christmas time, the diamond market has an increase in demand because loved ones are buying each other commodities for christmas, and a diamond is considered a

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