All in all, demand refers to how much (quantity) of a product or service is desired by buyers. And it is determined by the determinants like taste and preferences, income, population and price expectation. Price must always come first. Consumers are more tend to buy a product. if the price decreases. This kind of behavior on the part of buyers is in accordance with the law of demand. According to the law of demand, an inverse relationship exists between the price of a good and the quantity demanded of that good.
As the price of a good goes up, buyers demand less of that good.
This law will only be valid if ceteris paribus assumption is applied that means “all other things are equal or constant”. It means that the determinants of demand must be constant. This inverse relationship is more readily seen using the graphical device known as the demand curve, which is nothing more than a graph of the demand schedule.
Change in demand means the change in the determinants of demand. So, an increase in demand shifts the demand curve to the right while a decrease in demand shifts a demand curve into the left. If there is a change in demand, there is also a change in quantity demand, this is different to change in demand because it only shows a movement from one point to another point (a price-quantity combination to another price-quantity combination).
Another thing is the supply, it is the schedule of various quantities of commodities which producers are willing and able to produce and offer at a given, place, price and time.
Its determinants are technology, cost of production, number of sellers, prices of other goods, price expectation and taxes and subsidies. The law of supply states that “as price increases, quantity demanded increases and as price decreases, quantity demanded also decreases”.
According to the law of supply, a direct relationship exists between the price of a good and the quantity supplied of that good. As the price of a good increases, sellers are willing to supply more of that good. The law of supply is also reflected in the upward-sloping supply curve. A change in the quantity supplied is a movement along the supply curve due to a change in the price of the good supplied and a change in supply, like a change in demand, is represented by a shift in the supply curve.
Law of demand and supply explains that when the demand is greater than supply, price increases and when supply is greater than demand, price decreases. The law of supply and demand is not an actual law but it is well confirmed and understood realization that if you have a lot of one item, the price for that item should go down. At the same time you need to understand the interaction; even if you have a high supply, if the demand is also high, the price could also be high. In the world of stock investing, the law of supply and demand can contribute to explaining a stocks price at any given time. It is the base to any economic understanding.
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