How Market Forces Impacts Demand Supply

This “How Market Forces Impacts Demand Supply” is all about demand and supply role in market with effective presentation on price~demand examples and diagrams.

Demand is the number of the goods or services those are required by the customers in the market. The law of demand is the effective micro economic law which states the fact that remaining all the other factors equal, if the price of one commodity or the service sues to get increase the demand of that particular commodity or the service will get reduced. Thus, the reverse relationship between the increase in the price and the demand in the market can be experienced by the firms. Thus, firms are required to plan for the strategic step to set their price so that the demand response can be maintained in a positive manner.

Demand curve

 Demand curve ~ How Market Forces Impacts Demand Supply

From the curve, it can be observed that as the price is lowering down, the demand of that product use to get rise. Thus, apart from the change in the price, there are few factors which use to influence the change in the demand as below:

  • Change in the number of the buyers
  • Change in the income of the consumers in demand of the product or service of any firm
  • Change in the taste and the references of the consumers
  • Change in the expectations that the consumers have related with the products or the service with the firm
  • Introduction of the related good in terms of the substitutes.

Thus, BITER are the factors those are responsible for the shift of the demand curve. Thus, firms should consider all these factors while setting their process to match up and maximize the demand of their foods or services for the profit generation.

Shifting of the entire demand curve due to the positive change in the income level is towards right side and vice versa as below:

Increase in income, demand shifts right

 Increase in income, demand shifts right

If the popularity of the product or the service will get decrease, then the demand curve will shift towards left as below:

Decrease in the brand value

Decrease in the brand value

Thus, to mitigate the negative responses form the demand law factors, it is required by the firms to take the necessary marketing steps so that the reposes in terms of demand can be moved to the right side of the demand curve.

Check more: Economics Demand Supply

Supply can be termed as the amount of the products or the services that the seller intend to sell at the market process.  If the price of the goods or the services uses to get rise, then the supply gets rise and the demand get fall. Thus, the law of supply shows the direct relationship between the price and the quantity supplied by the producers as below:

Change in supply with price

 Change in supply with price

From the diagram, the straight relationship between the price and the supply can be observed. Apart from that there are other factors as below to have an impact of supply

  • Subsidiary and the taxes: subsidies motivate the production and taxes demotivate the production.
  • Technology percent boost op the supply
  • introduction of the other goods for production
  • Increment in the number of seller influence the supply
  • Positive expectations influences the supply and vice versa
  • The perfect resource allocation influences the supply

Thus, to cope up with the market situation, based on the price standard, and to meet the demand of the market, the producers should think strategically to overcome the market forces.

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