Law of Demand and Supply: Movement and Changes

CONTEMPRARY ECONOMIC

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
Law of demand, its movement along the same demand curve and changes due to factors.........3
Law of supply, its movement along the same supply curve and changes due to other factors....7
TASK 2..........................................................................................................................................10
Comparison of emerging theories and models...........................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES................................................................................................................................1

INTRODUCTION
Economics can be defined as that branch or area that studies the production,
consumption and distribution of the wealth in the economy. This can be done at an
individual level or at the level of the entire economy as a whole (Davies, 2019). Demand
and supply are two major factor of the market and these will be analysed in the report.
The different aspects, law and movement or shift in the supply and demand curve will
be evaluated and analysed along with the critical evaluation of the different economic
theories. In the last an appropriate conclusion will be presented summing up all the key
points.
MAIN BODY
TASK 1
Law of demand, its movement along the same demand curve and changes due to
factors.
Law of demand describes the relationship between the demand of a particular good in
the market and its impact on the price of that particular good. The law of demand
depicts the inverse relationship of the price of a good with its quantity demanded. It
states that when the price of a good will increase, the demand for that particular product
in the market will automatically decline (Petrova, Posadneva and Morozova, 2019). The
reason behind this inverse relationship is because of the diminishing marginal utility, i.e.
the demands that are most urgent are first met by the consumers and it is then followed
by the lower valued requirements that are met after urgent requirements are met. The
market demand curve which depicts the collective demand of all the consumers in the
market regarding a particular product is always downward sloping, i.e. the when prices
are high, the demand of the consumers for that product automatically decline.

It can be clearly deduced form the illustration above that the as the price of a product
increased from P1 to P2, the quantity demanded of that product automatically reduced
from Q1 to Q2.
Movement along the demand curve: Movement signifies the increase or decrease in
the quantity demanded due t the increase or decrease in the price of the product,
keeping other factors constant such as taste, preference, income etc. (Franks and Bryant,
2018). Demand curve here moves either upward or downwards i.e. there is either
increased demand or decreased demand. This movement is based on the assumption
i.e. Ceteris Paribus which illustrates the change in quantity demanded of the product
along with the change in its price assuming that all other factors that could impact
change remain constant.
Illustration 1: Law of Demand