Category: Basic

While the law is fundamental, it assumes: In reality, markets face monopolies, advertising influence, emotional buying, and government interventions. These factors can distort the law of supply and demand.

Sometimes governments step in to regulate markets. Example:If the government sets a price ceiling on wheat to make food affordable, it may discourage farmers from producing more, causing shortages.

The law of supply and demand is not just theory—it shapes everyday life. Housing Market:When more people move into a city, demand for housing increases. If supply cannot keep up, rents and property prices rise. Labor Market:When a skill (like AI programming) is in high demand but supply of skilled workers is low, salaries for…

Demand and supply do not remain static. They shift due to external factors: Factors that shift demand: Factors that shift supply:

At equilibrium price: Example:If the demand for face masks rises during a pandemic, equilibrium price increases because more consumers are willing to pay higher prices, and suppliers adjust to produce more.

Illustration (conceptual):

The law of supply states that, all else being equal, when the price of a product rises, the quantity supplied also rises; when the price falls, the quantity supplied decreases. Formulaically:Supply is directly related to price. Why does this happen? Example:If the price of wheat increases, farmers will be motivated to grow more wheat next…

The law of demand states that, all else being equal, when the price of a product falls, the quantity demanded rises; when the price rises, the quantity demanded falls. Formulaically:Demand is inversely related to price. Why does this happen? Example:If the price of apples drops from $3 to $2 per kg, more people will buy…