Analyses the Theory of supply and demand

Running head: PRINCIPLES OF ECONOMICS
Principles of Economics
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PRINCIPLES OF ECONOMICS
1
Table of Contents
Introduction......................................................................................................................................2
Article analysis................................................................................................................................2
Demand and supplies...................................................................................................................2
Elasticity......................................................................................................................................3
Conclusion.......................................................................................................................................4
References........................................................................................................................................5

PRINCIPLES OF ECONOMICS
2
Introduction
This paper analyses the theory of supply and demand. Moreover, it is important to
understand the role of demand and supply in microeconomics (Bas, Mayer and Thoenig 2017).
Market price and quantity depends on the supply and demand. In addition, this paper also
examines the elasticties. The role of elasticity is essential in neoclassical economics. There are
different types of elasticities. There is a significant role of elasticity in businesses. It helps to
determine the influence of the organization in the market.
Article analysis
Demand and supplies
Microeconomics deals with demand and supply. Both of these factors are used in price
determination under microeconomics (Knittel and Pindyck 2016). In a competitive market, when
quantity demanded is equal to the quantity supplied keeping all other factors such as capital and
labor constant, then the economy is said to be in equilibrium. Therefore, the role of supply and
demand is vital in economic equilibrium. To represent the relationship between demand and
supply graphically, quantity is potted on the horizontal axis and price is plotted on the vertical
axis. In addition, supply curve illustrates the relationship between the quantity supplied and
price. On the other hand, demand curve illustrates the relationship between the quantity
demanded and price.
There is an inverse relationship between the price and supply. As the quantity supplied in
the economy increases it decreases the price of the goods and services and vice versa. On the
contrary, there exists a direct relationship between demand and price. In addition, as the quantity
demanded increases it also increases the price of the goods and services. Therefore, the