when they are offered on the market at lower prices. When the price of an item falls, people are more willing and better able to purchase the item, and hence the demand for it goes up. Conversely, when the price of that same item rises, the demand for that item usually falls. The reason for a decline in demand is that a potential buyer does not buy an item, even if he or she needs it, if the price is unaffordable. People must not only be able to afford the product, they must also desire to buy the product. The issue of affordability usually remains dormant until the desire for the product is present (Slavin, 1994, p. 81).
Supply is typically defined as "the schedule of quantities of a good or service that people will sell at different prices" (Slavin, 1994, p. 54). Naturally, as the price of a product rises, people will be willing to sell more of it. There are two reasons why. First, individuals who are already in the business of selling the product wish to raise their profits. Second, the high profits to be made from products with a high price will attract new sellers to the market (Slavin, 1994, p. 54).
Supply and demand are related to each other in that they both deal with the price of a product and how this price affects the desire of both the buyers and the sellers. The common notion in these concepts is that the price of a product directly relates to the number of units sold. Price and quantity form the main measurement in economics. They are usually traced on a graph as two lines originating from opposite directions and moving toward each other. The point at which they meet is called equilibrium. Equilibrium is the point at which the price all buyers who are willing to buy the product can afford to buy the product equals the price at which all sellers who are willing to sell are able to sell. One of the basic tenets of economics is that the price of a product will tend toward the product's equilibrium leve...