Explaining the Law of Demand and Supply in Contemporary Business Economics

This report explains the law of demand and supply in contemporary business economics. It covers the concepts of movement along the same demand curve, changes in demand curve, movement along the same supply curve, and changes in supply curve. The report also discusses the factors that affect demand and supply in the market.

CONTEMPORARY
BUSINESS ECONOMICS

TABLE OF CONTENTS
INTRODUCTION.............................................................................3
MAIN BODY....................................................................................3
1.1 Explain the law of Demand, movement along the same demand curve (with the aid of diagram)
and changes in demand curve (with the aid of diagram)...............3
1.2. Explain the law of Supply, movement along the same supply curve (with the aid of diagram) and
changes in supply curve (with the aid of diagram).........................6
CONCLUSION.................................................................................8
References.........................................................................................9

INTRODUCTION
Microeconomics is basically a branch of economics that determines study related to
individual as well as firm’s behavior in making decisions related to allocation of resources (Bai
and et.al., 2019). It is essential to get a great knowledge related to such in order to evaluate the
conditions of economic welfare. This analysis involves factor pricing, product pricing and theory
of welfare. The practices related microeconomic considering law of demand and law of supply
which is the fundamental concept of economics. Thus, this report is going to determine the law
of Demand, movement along the same demand curve as well as changes in demand curve. On
the other hand, law of Supply, movement along the same supply curve and changes in supply
curve.
MAIN BODY
1.1 Explain the law of Demand, movement along the same demand curve (with the aid of
diagram) and changes in demand curve (with the aid of diagram)
Demand is economic determines as the consumer’s desire as well as ability to purchase
goods and services. It is denoted as an underlying force that drives growth of economy and its
expansion. The analysis of this process determines Law of demand, movement as well as
changes in the demand curve. Demand basically depends on requirements of customer that might
have the option to separate between a need and wants, however the opinions of economist’s
determines that they are something very similar. This demand is additionally founded on
capacity to pay. The explanation of such are determine below as:
Law of Demand: The law of demand is a fundamental concept in economics that
determines other factors are being constant whereas quantity and price demand of any service or
good are inversely relate to each other. This law basically determines consumer behaviour when
the prices of any products and services are being changed. In the market, it assuming that other
factors which affecting demand being constant, at the time the price of good rises than it leads to
a fall in the demand. Distinguishing the difference between demand as well as the quantity
requested is critical. The quantity ordered is the amount of items that buyers are able to purchase
at a given point of price. Apart from this, demand illustrates all the possible relationship between

the prices of the product as well as the amount ordered. Thus, there might be certain possibility
to evaluate effective changes in customer’s desired due to the uncertain changes in the prices.
Movement along the same demand curve: A movement in the demand curve is caused
by a demand-affecting factor other than a price change (Kunnumpurath and et.al., 2018). If any
of variables change, the amount consumers want to purchase changes regardless of the price.
Changes in demand in terms of increased or decreased could be known as the reason of shift in
demand curve. It can be seems when there is a variation in price, a change along the demand
curve happens. Furthermore, because of some kind of change in supply conditions, this may
occur. In this regard, it is assumed that the variables that affect demand are held constant.
Fluctuation in the price leads to a movement along with the demand curve and is known as a
change in the quantity requested.
The above presented graph determines two specific terms as:
 Contraction in demand: On the basis of above diagram it has been summarised that an
increase in the prices denoting as p, p1, p2 causes a movement along the demand curve,
and quantity demand falls which denoting as q, q1, q2.

 Expansion in demand: A fall in the price from p2 to p1 leads an expansion in the
demand. Thus it can say that that is a movement along the demand as well as more is
bought.
Changes in demand curve: A change in demand represents a difference in the willingness
of the customer to buy a certain product or service, regardless of the variance in its price. The
transition may be caused by a change in the amount of sales, the taste of the customer or a
particular price paid for the relevant commodity.
Thus, demand determines as an economic principle that refers to the desire of a consumer to
purchase things (Marwala and Hurwitz, 2017). There are a variety of variables that impact an
especially good or service's consumer demand. These factors are:
 Income: This is one most important factor that has a direct impact over the consumer
buying behaviour. This term determines how much amount consumer have to spend on
their basic desires.
 Price: This term determines that cost of products or service that customer have to pay in
order purchase their desire commodities. Price of a products impact directly upon
consumer purchasing behaviour.
 Buyer’s expectation: This factor determines that does the consumer believe the cost to
increase in the future, maybe due to reduced supply?

1.2. Explain the law of Supply, movement along the same supply curve (with the aid of diagram)
and changes in supply curve (with the aid of diagram)
In economics, supply represents the amount of a commodity on the market which is
available for sale at a fixed price at a given time. In relation to demand, supply refers to a seller's
ability to sell the agreed quantity of a commodity at a given price and time.
Law of Supply: As per the rule of economic, law of supply specifies that the amount of products
or services provided by producers will increase, all other considerations being equal, as the price
of a product or service rises, and vice versa (Tardieu and Tuffery, 2019). The rule of supply
states that manufacturers can attempt to increase their profits by raising the amount available for
sale as the price of an item goes up. In this process, law of supply basically depicts the behaviour
of producer at the time of changes in the price of goods and services. According to this rule when
the prices of goods as well as services rises, suppliers also increases supply that assist them to
earn higher profits because of higher prices. A price rise nearly invariably corresponds to an
increase in the quantity of the product or service provided, while the quantity supplied would
decrease with a decline in price. This optimistic association between price and quantity supplied
is referred to by economists as a higher price leading to a higher equilibrium quantity and a
lower price leading to a lesser quantity supplied. This is similar as the law of demand, the law of
supply implies that all other factors concerning supply are kept equal.
Movement along the same supply curve: When a product's price increases, it can result
movement in either a supply or demand curve. As the price of a product increases, the amount
supplied of a commodity changes accordingly as other considerations are kept unchanged. This
is just because of the direct relationship between these two components. It defined as a
movement in quantity given. Thus, this is graphically induces motion along the supply curve. A
market adjustment either allows supply curves to contract or rise. Movement along the supply
curve determines that when rates rise and other conditions remain stable, the quantity supplied
rises, which is referred to as an increase in production. It is also depicted graphically, as an
upward displacement over the same supply curve.

As per the above diagram it has been analysed that the quantity (mentioned in the form of q) is
shifted from q1 to q2 with the rise in the prices (denoted in the form of p) is shifted from p1 to
p2. In this condition, the slop remained same on the point a to b. It shows one to one relationship
between quantity supplied and price which determine that increase in the prices leads to increase
in the supply of products and services.
Changes in supply curve: A supply changes leads to a shift in the supply curve, which leading
to a consumer gap that is reversed by shifting costs and demand (Salem and Haouari, 2017). A
rise in the supply changes the supply curve to the right, whereas at the same time supply curve
shifts left by a reduction in the supply change.
From the above diagram it has been analysed that there are some clear factors that may
affect the quantity of supply by increasingly or decreasing. There are different conditions that
may induce change in the supply curve as technology, customer expectations and so on.

CONCLUSION
From the above report it has been summarized that supply and demand of products or
services are based on requirements of customers. In this, some of the factors play an essential
role that leads changes in the products delivering and its requirements. These factors could be
price of products, income of customers, needs of services users and so on. Thus, it is needed for
business analyst to evaluate the function of such in order to build a strongly hold a target market.
Requirements of customers may enhance opportunities for different business to maximize
demand of their services by providing desired satisfaction to customers.

REFERENCES
Books & Journals
Bai, J. and et.al., 2019. Coordinating supply and demand on an on-demand service platform with
impatient customers. Manufacturing & Service Operations Management. 21(3). pp.556-
570.
Kunnumpurath, S. and et.al., 2018. Global supply and demand of opioids for pain
management. Current pain and headache reports. 22(5). p.34.
Marwala, T. and Hurwitz, E., 2017. Supply and Demand. In Artificial Intelligence and Economic
Theory: Skynet in the Market (pp. 15-25). Springer, Cham.
Tardieu, L. and Tuffery, L., 2019. From supply to demand factors: What are the determinants of
attractiveness for outdoor recreation?. Ecological Economics. 161. pp.163-175.
Salem, R.W. and Haouari, M., 2017. A simulation-optimisation approach for supply chain
network design under supply and demand uncertainties. International Journal of
Production Research. 55(7). pp.1845-1861.