# What is Demand and Supply in economics?

Demand refers to the willingness and abilities of buyers to purchase different quantities of a good at different prices during a specific time period.

So in the supply demand curve, demand is area covered, meaning the result of P*Q, whereas quantity demanded refer to the specific point at the curve showing the actual quantity at specific price

Letâ€™s do a simple example to verify your understanding about demand and supply curve

Assuming the price of a pizza for a specific brand, which was originally \$10 last week, but now \$15 this week, my question is, the demand curve for the pizza must have shifted rightward between last week and this week. Is that true?

Give you 10 seconds.

Well the answer is FALSE. Why? Because the change in price of the goods only leads to the movement along the demand curse instead of shifting.

Okay letâ€™s move on. What’s the quantity demand schedule in economics? A demand schedule is usually represented by a table that shows the quantity demanded of certain goods (or service) at a variety of price levels. For example, it can be plotted as a graph showing a demand curve in which the X-AXIS represents the QUANTITY and Y-AXIS represents the PRICE.Â

## What is Demand Schedule?

Letâ€™s take a look of below example to illustrate:

Assume John and Mary are the merchandise of video games in a game market. The following table shows their monthly demand schedules

According to the demands of both parties, the Market Demand Schedule will be as below:

Hope this example clearly shows you the relationship between demand, quantity demanded and market demand schedule.

Letâ€™s do one more exercise to help you fully understand all the demand curve concepts in economics. It will be fun and practical.

Consider the demand curve for Robot vacuum cleaners in Canada is huge. Letâ€™s make some assumption as a foundation of discussion:

Assume all Robot vacuum cleaners are IDENTICAL and selling at the same price.

Letâ€™s say the current market price of the cleaner is \$300

Average family income is \$50000 annually

Price of electricity in Canada \$0.2 per kWh

Now because of the economic downturn, the price of the Robot Vacuum cleaner decreased from \$300 to \$280. What will happen in the demand curve?

We would say, it will cause a movement along the demand curve from higher point to lower point but remember that it will not shift the demand curve.

At the same time, letâ€™s suppose the average family income causes a leftward shift of the demand curve, what is your conclusion?

## What is the take away?

In this case, we will say the Vacuum cleaner is a Normal good which has a positive correlation between demand and the consumer income.

Now dealing with inflation, the price of electricity in Canada rises from \$0.2 per kWh to \$0.3 per kWh, the demand curve for the Vacuum Cleaner will be shifted to the LEFT because Vacuum cleaner and electricity are Complements in economics, meaning both of them are consumed together, thatâ€™s why the demand curve will be shifted.

Alright, so now come to a more common term in economics: Whatâ€™s an equilibrium price of the market? As an economics student, we always say when the market supply and demand are balancing each other as a stable state is called market equilibrium. Thatâ€™s to say when the supply is over this point, the price will drop (Over-supply) while the demand is higher than the supply the price should go up (Shortage). Thatâ€™s kinda common sense.

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