Explaining Law of Demand and Law of Supply

Contemporary Business
Economics

TASK 1............................................................................................................................................2
1.1 Explaining law of demand and the factors that causes change in the demand
curve............................................................................................................................................2
1.2. Explaining law of the supply and the factors that leads to shift in the supply curve
.....................................................................................................................................................5
TASK 2............................................................................................................................................8
Comparing 20th century economic theory with that of 21st century....................................8
REFERENCES............................................................................................................................11

TASK 1
1.1 Explaining law of demand and the factors that causes change in the demand curve
When quantity demanded of a particular product or the commodity changes due
to the changes in the price along with the other factors remains as constant, there
results a movement in the quantity demanded along with same curve. The most
significant aspect is that the other factors such as income of the consumer and the
tastes with price of the other types of goods remains as constant & only price of the
goods changes. In such case changes in the price impacts quantity demanded but the
demand follows same curve as before price changes (Marwala and Hurwitz, 2017). It is
called as the movement of demand curve and this movement could occur either in
upward or the downward direction along with a demand curve. The movement could
either be occurred in upward or the downward direction along with the demand curve.
In case if all the other factors remains as constant then a rise in prices of the commodity
leads to decrease in the demand. Also the decrease in price results to increase in the
demand.
The above diagram shows that the price increases from the OP point to the OP’’, the
quantity demanded declines or falls to the point OL and this results the demand curve to
move in upward direction. On the other hand, when the price declines from the point OP

to OP’, quantity demanded increases to the point ON and this leads the demand curve
moving towards the downward direction.
Shift of Demand Curve
At the time when quantity demanded changes of the specific commodity at each and
every possible price because of the change in one or more than a single factor, this
leads to shift in the demand curve. The most essential aspect of it is that the other
factors such as income, taste and preferences of the consumer with price of the other
goods that were expected as to remain as constant get changed. In such situation,
change in the price with change in one or more than one factor impacts quantity
demanded (Shift in demand curve, 2018). Thus, demand follows the different type of
curve for each and every kind of the price change. This is called as the shift in the
demand curve as the curve could be shifted either from left to right or from right to left,
depending on different factors that are affecting it.
Demand for the goods and the services does not remain as constant over the time and
as a result, demand curve shifts left or right on a constant basis. There are mainly five
different factors that causes a shift or the change in the demand curve that are as
follows-