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Research paper

7. What are the laws of Supply and Demand , why are they so important  in the study of economicsThe two sides of each market transaction are called supply and demand. We are supplying resources to the market when we look for a job – that is , when we offer our labor in exchange for income. But we are demanding goods when we shop in a supermarket  - that is , when we are prepared to offer money in exchange for something to eat. Business firms may supply goods and services in product markets at the same time that they are demanding factors of production in factor markets.

Whether one is on the supply side or the demand side any particular market transaction depends on the nature of the exchange , not on the people or institutions involved.


Although  the concepts of supply and demand are useful for explaining what is happening in the marketplace , we are not yet ready to summarize the countless transactions that occur daily in both factor and product markets. Recall that every market transaction involves an exchange and thus some element of both supply and  demand. Then just consider how many exchanges you alone undertake in a single week , not to mention the transactions of the other 245 million or so consumers among us .The daily volume of market transactions is truly awesome ; to keep track of so much action, we will need to summarize the activities of many individuals.

So a demand exists only if someone is willing and able to pay for the good.

Demand curve: this curve is describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period.

Quantity of goods demanded

A demand curve is a graphical illustration of a demand schedule. Each point on the curve refers to a specific quantity that will be demanded at a given price. If , for example,  the price of the good was 35 Sk , this curve tells us the consumes would purchase 5 pcs. If it costs 30 Sk , 7 pcs would be demanded. Each  point on the curve below corresponds to a row in the above schedule. 

Demand schedule:  demand schedule  indicates the quantities of good a consumer is able and willing to buy  at alternative prices. The demand schedule above indicates that people would buy more goods or services in lower prices as it they buy the same goods in higher prices.


Price of some good in Sk

Quantity of people who would buy this good in a given prices




























A common feature of demand curves is their downward slope. As the price  of a good falls ,people tend to demand more of it. This inverse relationship between price and quantity is so common we refer to it as the law of demand. Or in other words:  the quantity of a good demanded in a given time period increases as its price falls.

A demand curve shows how the quantity demanded changes in response to a change in price ,if all else remains constant. But the determinants of demand may themselves change, causing the demand curve to shift .

But we also know market demand. That means the total quantities of a good or service people are willing and able to buy in a given time period , or it is the sum of individual demands.

All  individuals have different demand curves. If we give all this curves together, we will see the market demand curve.


To understand how the price of typing is established we have to look also at the other side of the typing market – namely, the supply side. Knowing what the people  are willing to pay for for example typing does not tell us how much typing will be available in campus. We also need to know how many pages of typing people are willing and able to sell at various prices  -  that is the market supply. As on the demand side, the market supply depends on the behavior of all the individuals who are willing and able to supply typing services at some price.

Generally how much money can one make from typing depends on a number of things. As a consequence ,the determinants of supply include: technology , factor costs , other goods , taxes , expectations , number of sellers.

Supply curve:


0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180                                                                         
quantity supplied

The market supply curve indicates the combined  sales intentions of all market participants. If the price of typing were 2.5 per page , the total quantity of typing supplied would be 62 pages. This quantity is determined by adding together the supply decisions of all individual producers.

Shift in supply: The determinants of market supply include technology ,factor costs ,  other goods, taxes , expectations and the number of sellers. If these determinants change, the supply curve shifts. An increase in supply implies a rightward shift of the supply curve ,with greater quantity  supplied at a given price .

Bibliography : 
“ The macro economy today “ , Dr. Bradley R. Schiller , 1989 , New York
“ Microeconomic theory 3/ed “ , Dominic Salvatore , 1992 , USA my  economy notebook

Robert Kováč , 4.E

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