What is Demand and Supply
Demand and supply are both interconnected concepts related to a commodity. Both are described as market forces due to which the price of a commodity decided.Now firstly let us discuss the concept what is demand? In the words of a layman, the demand of a commodity can be described as a desire to buy that commodity. But it should be noted that only desire to buy a commodity cannot be termed as demand. From an economic point of view, demand arises when there is not only a desire to buy but also there is a presence of a monetary ability to pay for such a commodity. In addition to that there should also be willingness on part of the consumer to pay for that commodity. So we can say that a demand arises only when these three factors are available:-
Desire to buy a commodity. Ability to pay for such a commodity Willingness to pay for that commodity.
Now in simple terms, supply of a commodity can be described as quantity of goods manufactured for a commodity. But in economics, only manufactured quantities cannot be termed as supply. Rather it is the goods available in the market for the purpose of sale. So if the goods stored in the warehouses and not displayed for the purpose of sale are not termed as supply of goods.
Now let us discuss how both the concepts are interrelated and act as market forces for the price determination of a commodity. It is noted that the price is determined at a stage when demand becomes equal to supply. When in an economy the demand becomes equal to supply then it is assumed that the economy is developing smoothly. When demand becomes more than the supply than the price of that commodity tend to increase and the situation of inflation arises in the market. While when demand becomes less than supply the prices go down and the regression spreads over the whole market. Neither the excess of demand nor the lack of it is an ideal situation, the economy can develop only when the demand equals to supply in which condition prices are in a regulated position and full employment can also exist in the market. So we can conclude that the both factors are very important to be regulated for the achievement of development in any country.