Meaning of Demand And Supply - SS2 Economics Lesson Note

Demand and Supply are the two most important concepts in economics that help us to  determine the prices and quantities of goods and services in the market.

Demand refers to the quantity of a good or service that consumers are willing and able to buy at a particular price during a specific period. It is a function of price, income, tastes and preferences, and the availability of substitutes. As the price of a good or service decreases, the quantity demanded of that good or service increases, ceteris paribus.

For example, if the price of smartphones increases, the quantity demanded of smartphones may decrease as consumers may go for cheaper alternatives or delay their purchase of the initial smartphone until the price falls. If the price of smartphones decreases, the quantity demanded of smartphones may increase as consumers may find them more affordable and may purchase them more frequently.

Supply, on the other hand, refers to the quantity of a good or service that producers are willing and able to sell at a particular price during a specific period. It is a function of price, production costs, technology, and government policies. As the price of a good or service decreases, the quantity supplied of that good or service decreases, ceteris paribus.

For instance, if the price of oil increases, oil producers may increase their output to take advantage of the higher prices and earn more profits. If the price of oil decreases, oil producers may decrease their output to avoid losses or cut costs.