Supply and Demand Theory in Economics

This report analyzes the concept of market equilibrium and how it is determined in case of shifts in the demand and supply curve. It explains the various aspects that include demand and supply with its elasticity and inelasticity. The report also discusses the economic issues that have developed in the UK market near Christmas 2021.

Economics

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................4
Basic demand and supply equilibrium........................................................................................4
Supply Curve shift to the Right...................................................................................................5
Supply curve shift to the Left:.....................................................................................................6
Demand curve shift to the Right.................................................................................................7
Demand curve shift to the Left....................................................................................................7
Elastic Demand...........................................................................................................................8
Inelastic Demand.........................................................................................................................9
Elastic Supply............................................................................................................................10
Inelastic Supply.........................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Demand is defined as the term of economics which analyse the desire of the individual to
buy the particular goods and services backed with the sufficient purchasing power at the given
prices at a particular point of time. The concept of demand is basically depends upon the ability
of the consumer to pay the specific goods and services to the customers(Hoang And et. al.,
2019). On certain amount, the particular products is beings sell is called as the price of the
commodity. The price at which the given products is being purchase by the consumer is known
as the demand of the respective goods. For instance, when the demand of the water bottles
increases then the demand or the same reduces due to high prices. This shows the inverse
relationship between the quantity demanded and he prices of the given goods in the market.
On other side the supply is the fundamental concept in which the goods and services of
the company is being produced by the manufacturer at the given prices. At a given prices, the
products is being offered to their prospective customer is known as the prices of the given goods
in the market. A particular quantity at which the given products is being offered to them is called
as the quantity supplied. For instance, when the market prices of the pen increases then the
supply of the same also increases as the supplier will generate more profits at higher prices in
order to maximise their revenue and profitability. There is the positive relationship between the
supply and the given prices of the commodity in the market is known as the law of supply.
Market Equilibrium is defined as the equilibrium in the market in which the demand and
supply of products and services are meeting. It is the state in which the price of commodity is
being made by the general consumer so that they offer the goods at affordable prices.
Equilibrium of goods and services are being offered at which the given products are being sold in
the market. Quantity demanded is the quantity which is being demanded by the consumer in the
market. It helps in having the better interaction for the economy as it helps in deciding the prices
and the number of goods to be sell further. This respective report analyse the concept of market
equilibrium and it is being determined in case of shift in the demand and supply curve. It
explains the various aspects that includes the demand & supply with its elasticity and in
elasticity. All such interpretation is being made by analyse the economic issue that has been
developed in the market of UK near the Christmas of 2021.

MAIN BODY
UK have faced the many challenges due to the huge impact of Brexit and Covid-19 in the
second last and last quarter of the 2021. There is huge demand of certain products and services in
the holiday season of Christmas. The people of UK are facing the huge deteriorating supply of
necessary and premium goods in the large market as there is high demand of goods in peak
season(Bai and et. al., 2022). There is the low supply of turkeys and pigs due to the minimum
output from the industries from the market. The main consideration for this reduction have seen
due to the huge impact of Brexit and Covid-19 will likely to be decreased production and the
involuntary unemployment takes place in the market due to the lesser employees from other
nations. The changing market conditions are further discussed to better understand the condition
that have arises in the United Kingdom.
Basic demand and supply equilibrium
The above given graph shows the market equilibrium at normal state as when the
marketing is working in an smooth manner and fulfilling demand of the potential customer by
supply sufficient products to them. Curve D is the respective demand curve that shows the
negative relation between the given price and the quantity of the given goods. Whereas the
Price
d
s
p
Quantity
q

Curve S us the supply curve that determines the positive relationship in the quantity supplied and
the demand of the given goods in the large market. There is the point D and S in which they meet
is known as the market equilibrium. Point P and Q are at x-axis and y-axis which shows the
prices at which the commodities is going to be the traded and the overall quantity at which it is
going to be traded further.
Supply Curve shift to the Right
There can be sift to the right or left of the supply curve due to rise or fall in the overall
supply of the commodities and services. Rising in the supply of the goods tends to increases the
overall supply in the target market with the help of innovation, sufficient availability of raw
material and so on.
It is shown from the above diagram that when the given supply curve sift to he right and
the old equilibrium is meeting the point when the D curve is meeting the S curve shows the
demand of the products and S is showing the supply of the goods in the market. There is shift in
the supply curve to the right which shows the increase in the supply of goods and services in the
market. With the rise, the price equilibrium has been reduced and the quantity supply of the
goods tends to rise in the market. The orange line coming from x-axis determining the new
Price
d s
p
Quantity
q

quantity supplied of certain goods and services in the market. In respect to UK, when the market
has not seen any such change or increases in the given supply of goods in the year of 2021.
Supply curve shift to the Left:
A supply curve can shift to the left in which there is the reduction of the supply of goods
and services in the target market due to the insufficient transport condition, strict government
polices, cost of production is high and so on.
As per the given graph, the market equilibrium is achieved as when the supply of
particular goods shift towards the left which shows the decreases in the supply of goods and
services in the market and the equilibrium price of the goods tends to rise. This is due to the fact
that demand for goods is stagnant and the equilibrium quantity of goods has decreases due to the
shift. The case of UK has been the same as there is the big fall down in the supply of goods and
the consumer are facing hike in the prices. The economy of UK was facing the lack of timely
delivery of certain goods due to the lesser transport drivers.
Demand curve shift to the Right
In this, the demand curve can shift to the right which leads to increases in the demand of
the goods in the market(Song and Zhu, 2019). Rise in the overall demand can leads to the
Price
d s
p
Quantity
q

positive change in the overall income level of the consumer, change in substitute and
complementary goods.
The above diagram shows the increases in the demand curve as the orange line is the new
demand which is tending to increase in the market due to the increase in the prices of the
commodities in the market. As in UK, the demand for such goods increases due to the festive
season, the prices are keep increasing and the producer will supply more at high prices. This case
is being seen in the early stage of the business but after that the producer are few to supply the
goods and services in UK market.
Demand curve shift to the Left
A demand curve can shift to the left when there is the decrease in the overall demand for
the goods in the market. Reduction in the demand curve may leads to have the negative image of
the particular goods in the mind set of the individual. This also tends to reduces the overall
disposable income of the consumer.
Price
d s
p
Quantity
q

It is being analysed from the above graph that when the equilibrium point is being
achieved when the demand and supply curve interacts. The overall economy is declining in the
demand of the goods. Decrease in the overall demand shift the curve to the left of the demand
curve. The given orange line shows the shift of demand curve due to the reduction in the
demand curve. The equilibrium of price and quantity is decreasing due to the fast that when the
demand of product decreases, the prices also decreases to make the products more consumable
for the consumer. Thus, the prices reduce then the supplier also supply less as they are not
generating more profits.
Elastic Demand
Demand elasticity refers to the demand that is being seen in major change in quantity
demanded fur to the huge change or no such change in the prices of products (Kano, 2021).
Price
d
s
p
Quantity
q

It is seen from the above graph that elastic demand takes place when there is the slight
change in the prices can be seen to the major change in the equilibrium quantity of the products.
When the prices of the products increases 5% in the blue line which is lie on Y-axis, the
equilibrium quantity tends to fall-down by 15% and the fall down in the prices by 5% ti the
orange line on y-axis. Thus, it can be said that the the equilibrium quantity increased by 15% to
the orange line which lies on x-axis. The demand curve is elastic for say products that are having
such kind of demand is luxury cars and unique stones etc.
Inelastic Demand
The demand is said to the inelastic when there is little change in the quantity demanded
due to the change in the given prices of the products.
Price
d
s
p
Quantity
q

As per the above diagram, it is shown that how the overall equilibrium met the economy
for the certain product when the demand is inelastic. Respective demand curve in this steeper
15% variation in the prices of the goods. The consumer demand for goods are most likely to be
equal that includes the products such as necessity items. Best example for products in which they
are having such kind of demand are vegetable, medicine etc.
Elastic Supply
The supply is said to the elastic when there is large change in the quantity supplied fur to
the major change in the prices of the commodity.
Price
d
s
p
Quantity
q

As per the above graph, it is being shown that blue & orange curves which can be seen
which the prices increases and the decreases just by 5%, the overall quantity supplied rises and
falls in 20%. It includes the case of pizza and soft drink as the producer can offer more or less
even in very less increases in the prices.
Inelastic Supply
A supply is being inelastic which the supply of the product in which there is very little
change in the overall supply of goods even when the prices of the commodity changes at huge
level(Bai and et. al., 2020).
Price
d
s
p
Quantity
q

From the above diagram, the equilibrium point that are achieved and the supply is
inelastic. When the given prices of the products increases by 20%, the equilibrium quantity
increases by just 5%. It includes the case of food, water etc.
CONCLUSION
From the above report , it is concluded that there is the inverse relationship in the prices
and the demand of the given goods. Whereas the quantity supply and prices are having positive
relationship. There is the point in which the demand is meeting the supply of the given goods
called as the equilibrium. The law of demand & supply is having the crucial aspects in an
economy as it is related to the investors and economists to better understand the market and the
conditions in which they are operating.
Price
d
s
p
Quantity
q

REFERENCES
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Golpîra, H. and Khan, S.A.R., 2019. A multi-objective risk-based robust optimization approach
to energy management in smart residential buildings under combined demand and
supply uncertainty. Energy, 170, pp.1113-1129.
Kano, T., 2021. Exchange Rates and Fundamentals: A General Equilibrium Exploration. Journal
of Money, Credit and Banking, 53(1), pp.95-117.
Song, J. and Zhu, Z., 2019, December. A Scheme of Combining Differential Chaos Shift Keying
with Multiple-Input Multiple-Output System. In 2019 International Conference on
Information Technology and Computer Application (ITCA) (pp. 175-179). IEEE.
Wang, Y., and et.al., 2021. Exploring the transverse wicking behavior of mechanically robust
warp super-elastic woven fabric for tight-fitting garments. Textile Research Journal,
p.00405175211066149.
Bai, X., and et.al., 2022. Coordination evaluation and obstacle factors recognition analysis of
water resource spatial equilibrium system. Environmental Research, p.112913.
Cavalcanti, F.M., and et.al., 2019. A catalyst selection method for hydrogen production through
Water-Gas Shift Reaction using artificial neural networks. Journal of environmental
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Hoang, N.H. And et. al., 2019. A linear framework for dynamic user equilibrium traffic
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Liu, J., Gao, T. and Du, Y., 2020, October. Research on Equilibrium Control Method of Urban
Road Network Based on Big Data. In Proceedings of the 4th International Conference
on Computer Science and Application Engineering (pp. 1-5).