Working definition of supply and demand:
Supply:Willingness and ability of the producers to offer the goods in the market for sale at a various prices.
Demand:Consumers desire , ability and will to purchase goods at various prices.
Here supply and demand are the backbone of the market economy and it is fundamental concepts of economics.The economy is said to be in equilibrium between price and quantity.It is stated that where supply increases the price will tend to drop or vice versa, and as demand increases the price will tend to increase or vice versa.
Law of supply:It results from the general tendency for the marginal cost of producing a good or service to increase as the quantity produced increases.
cost of production , profitability of alternative products,profitability of goods in joint supply, nature and other random shocks,aims of producers, expectation of producers,seasonality and information asymmetry , these are the non price determinants of supply.
Law of demand:Other things remaining the same, the higher the price of a good,the smaller is the quantity demanded; and the lower the price of a good, the larger is the quantity demanded. It results from substitution effect and income effect.
Tastes, number and price of substance goods, number of price of complementary goods, income,distribution of income, expectations and information asymmetry are the non price determinants of demand.
Demand estimation and forecasting:
1.Consumer interviews or surveys-to estimate the demand for new products, to test customers reactions to change in the price or advertising, to test commitment for established products.
2.Market studies and experiments-to test new or improved products in controlled settings.
Supply:Willingness and ability of the producers to offer the goods in the market for sale at a various prices.
Demand:Consumers desire , ability and will to purchase goods at various prices.
Here supply and demand are the backbone of the market economy and it is fundamental concepts of economics.The economy is said to be in equilibrium between price and quantity.It is stated that where supply increases the price will tend to drop or vice versa, and as demand increases the price will tend to increase or vice versa.
Law of supply:It results from the general tendency for the marginal cost of producing a good or service to increase as the quantity produced increases.
cost of production , profitability of alternative products,profitability of goods in joint supply, nature and other random shocks,aims of producers, expectation of producers,seasonality and information asymmetry , these are the non price determinants of supply.
Law of demand:Other things remaining the same, the higher the price of a good,the smaller is the quantity demanded; and the lower the price of a good, the larger is the quantity demanded. It results from substitution effect and income effect.
Tastes, number and price of substance goods, number of price of complementary goods, income,distribution of income, expectations and information asymmetry are the non price determinants of demand.
Demand estimation and forecasting:
1.Consumer interviews or surveys-to estimate the demand for new products, to test customers reactions to change in the price or advertising, to test commitment for established products.
2.Market studies and experiments-to test new or improved products in controlled settings.
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