Theory of demand and supply

Demand

The desire or will of any person or community for a commodity, considering both the desire to purchase and the ability to pay.

Direct Demand

Demand for a final object or commodity as opposed to demand for inputs or raw materials.

Price Demand

The quantities of a commodity that consumers would purchase at various prices, showing an inverse relationship between price and quantity demanded.

Income Demand

The quantities of goods and services purchased by consumers at various levels of income, reflecting a positive relationship for normal goods.

Cross Demand

Changes in the demand for one good due to changes in the price of another related good, encompassing both substitute and complementary goods.

Substitute Goods

Goods used in place of each other; for example, Fanta and Mirinda.

Complementary Goods

Goods that are used together to satisfy a want; for example, printers and ink cartridges.

Derived Demand

Demand for goods and services that are used to produce other goods and services.

Joint Demand

Demand for several goods and services with a single purpose.

Shift in Demand Curve

Change in the quantity of a commodity demanded at the same price due to changes in factors other than the price of the commodity.

Law of Demand

Describes the inverse relationship between price and quantity demanded, wherein price falls, demand increases and vice versa.

Giffen Goods

Goods whose quantity demanded increases as the price rises, violating the law of demand.

Market Equilibrium

A state where the quantity demanded equals the quantity supplied, resulting in no tendency for price to change.

Supply Function

Shows the relationship between supply and its determinants, typically indicating a positive relationship between price and quantity supplied.

Linear Supply Function

A supply function where both price and quantity supplied change at a constant rate.

Non-linear Supply Function

A supply function where the change in price and supply does not occur at a constant rate.

Determinants of Supply

Factors that determine the quantity of a good or service that producers are willing to sell, including price, technology, and number of firms.

Rightward Shift in Supply Curve

Indicates an increase in supply, meaning more is supplied at any given price.

Leftward Shift in Supply Curve

Indicates a decrease in supply, meaning less is supplied at any given price.