The Basics of Demand: What is Demand and Who Does It Affect?
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The Basics of Demand: What is Demand and Who Does It Affect?

Consumers demand a certain product. What happens for the suppliers?

As people in a majorly capitalistic world, studying economics is one topic that everyone should be learning. Economics can show us how money flows and can determine a societies’ stability. The economy is talked about a lot due to the recession most countries as I write this in December 2011.

A big concept in economy is markets and the actions of consumers (buyers) and suppliers (sellers) in these markets. Markets are directed by both the consumer and the suppliers. They both determine the prices as firms compete to keep prices lower and consumers are only willing to pay a certain amount.

Consumers in Markets

Consumers in a market demand a certain product, a certain way, at a certain price, and only want a certain amount of that product. Consumers want a certain product to do a certain function and the suppliers try to figure what that is and provide it to the consumer to make a profit. Markets are becoming more complicated as online markets, such as the search engine market are put into play.

What is Demand?

Demand is simply the wants of the consumers. In economics, demand refers to just how much of a product consumers want. So if a consumer wants 50 water bottles then that is "their demand". And if 15,000 water bottles are sold in a certain period of time, then that's the demand of all consumers. There is even a Law of Demand!

What is the Law of Demand?

The Law of Demand states that as the price decreases, the quantity demanded of a product increases. This makes sense; the lower the price of something the more of that item you will buy, right! So it also makes sense that as price increases, the quantity demanded of a product decreases. That's what is called an inverse relationship.

An inverse relationship is when X increases, Y decreases and when X decreases, Y increases. In other words, they do opposite things. In this case, X is price and Y is quantity demanded.

How Does Demand Affect Suppliers?

Consumers are the ones that demand the products. So how does this affect the suppliers? Well, it changes how much they will supply. When they drop the price more people will buy the product. So they make less per product but sell more products. And when the price increases, they make more per product but sell less products. They want to find an equilibrium to earn the maximum amount of money they can. 

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