Supply and Demand in the Marketplace

Paper Summary:

In this article, the writer explains that the general concept of supply and demand is that these two notions are essential in correctly allocating resources in a market economy and in correctly forming the price for a certain commodity, where the supply and demand for a commodity meet. In order to refer to both these notions, one needs to closer investigate the law of demand and the law of supply as essential theoretical frameworks in determining the concepts of demand and supply. The writer discusses that when the price cannot be formed at a certain level because a high or low supply or demand, the market will automatically readjust in order to be able to facilitate the new level at which price will be formed. This is one of the great impacts of demand and supply, the fact that they can regulate without a third force intervening.

From the Paper:

"The way the price is formed depends on the reaction of the suppliers. On one hand, they can decide that this is an excellent opportunity to increase their own revenues and volume of sales by providing more turkeys on the market and by generating higher sales, given that the demand has increased to a certain level. However, it may be the case that no more turkeys can be supplied on the market, which would lead to the price forming higher than at the beginning. The reason for this is that demand will remain at a high level, but also at a level where it cannot be entirely satisfied by the existing supply on the market. Because of the scarcity, people are going to have to pay more in order to satisfy their need.
"The rise in the price of crude oil comes following a similar rationality. At this point, crude oil seems to be a scarce resource. Indeed, estimates regarding existing consumption and global reserves have shown that crude oil may be exhausted by 2050."

Sample of Sources Used:

• Economics Basics: Demand and Supply. Investopedia. On the Internet at http://www.investopedia.com/university/economics/economics3.asp. Last retrieved on December 14, 2007
• How Supply and Demand Determine Commodities Market Prices. On the Internet at http://tfc-charts.w2d.com/learning/supply_and_demand.html. Last retrieved on December 14, 2007

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