ANALYSING DEMAND AND SUPPLY

Firstly, with regard to terminology, we should distinguish demand from needs.

Peoples instinctive needs are categorized in terms of materials and spirit. An
economic definition denotes peoples needs which are both instinctively and socially
characterized and which can be estimated on market.
Demand is the amount of goods and services which buyers are willing and able to buy
at a range of different prices. Therefore, demand is just the willingness and ability to
buy, not an expression of an actual buying process. When being demonstrated on a
graph, the demand curve demonstrates quantity consumers (households and
businesses) are willing and able to buy at a range of different prices.
The demand curve are always inclined to slope downward, to the right. This is
determined by the law of demand: the demand for a certain type of goods or service
will rise when its price falls.
Supply is the quantity of goods and services which sellers are ready to sell and able to
sell with different prices at a certain period. Supply of the market is not just the ability
and willingness for sale, but the expression which denoting selling processes. When
being demonstrated on a graph, the supply curve determines quantity of goods which
the seller are willing and able to sell at a range of different prices.
Supply curve is inclined to slope downward, to the left. This is determined by the law
of supply: the supply for a certain types of good and service will increase when its
prices also increases.
The demand curve and supply curve will intersect at a point which indicates that there
is only one price level and a certain quantity of goods and services which correspond
to meet need of both the sellers and the buyers. That is the equilibrium point of
demand and supply, or the market prices. And we can see that: whenever price is
higher or lower than the market price, at the market equilibrium point, excess or
shortage of goods on the market will occur.
Another problem is that the market equilibrium will change when the supply curve or
demand curve shifts. It means that this price is not relatively valid and not fixed.
Why? Because it is dependent on the supply- demand relationship, which supply and
demand themselves are affected by many different factors, such as technology
advancement, consumers income, governmental policies, supply of substitutes,
lifestyles