Supply and Demand

Supply and Demand

Introduction

Supply and demand play a big role in marketing and is a really important concept. Supply and demand is a kind of law that people who run businesses follow to earn profit.

What is supply

Supply is the total amount of a specific good or service available to the customer.

example…

A person used to manufacture 50 pencils per day. He can only supply 50 pencils per day so 50 pencils are the supply.

 

What is demand

Demand is what customers want or need more than the supply of goods or services there is.

example…

There are 1000 apples in an apple store and 50 people and each needs 25 apples. in total customers need 1250  apples but there are only 1000 apples available so now apples are in high demand.

 

Relation between Supply and Demand

  Supply and demand have a strong relationship with each other. When the demand is high and the supply is low the sellers may increase the price of the product. When the supply of the product is high the seller/sellers may reduce the price to grow their demand.

 

example 1…

A person who sells handmade pencils manufactures 100 pencils per month and each pencil is 10$. He has high demand but many people are asking for less price. so to satisfy the customer’s needs he reduced the price to 8$, he was getting more demand than before but now he was getting less profit, so he invested his money to buy a machine to reduce the production cost and now he could produce 200 pencils per month and he kept his price to 10 dollars. Now he was able to supply more and earning profit.

 

Example2…

let us see the COVID-19 situation, the vaccines for COVID-19 are working better, so many people are coming to take the vaccination but on the other hand, there was a less supply of vaccines.

 

 

Law of supply: The higher the price, the more we supply.

if the manufacture gets more profit, then he supplies more goods or services and vice versa. 

Law of demand: The lower the price, the higher we demand.