MARKET DEMAND, MARKET SUPPLY AND EQUILIBRIUM PRICE

 MARKET DEMAND, MARKET SUPPLY AND EQUILIBRIUM PRICE

 In economics both demand and supply are the important forces through which market economy functions. Individual’s demand is desire backed by his / her ability and willingness to pay. There is an indirect or negative relationship between price and quantity demanded. Individual Supply is the amount of a product that producer is willing to sell at given prices. There is a direct or positive relationship between price and quantity supplied. Market Demand Individual demand for a product is based on an individual’s choice / Preference among different products, price of the product, income etc. Individual demand is nothing but desire backed by individual’s ability and willingness to pay. By summing up the demand of all the consumers or individuals for the product we get market demand for that particular product.

Table Market Demand Schedule

The above table represents demand schedule of individual A, individual B and Market Demand. Same schedule can be represented with the help of a graph. 

Diagram  Market Demand Curve

Diagram represents demand curve of individual A, individual B and Market Demand. DA is a demand curve of individual A. DB is the demand curve of individual B. DM is the market demand curve. All curves are downward sloping indicating negative relationship between price and quantity demanded.