Supply and demand are at the heart of the current market mechanism. What are these categories, what are the characteristics of each of them, and what is the difference between supply and demand? Let's consider this in more detail.
Definition
Under demand means the demand for a certain product on the part of the population.
Offer is the intention of the manufacturer to sell its products on the market.
Comparison
So, in one case, the initiative comes from the potential buyer, and in the other - from the manufacturer (seller). Both categories are characterized by size. At the same time, in relation to demand, it is expressed in the amount of goods that the consumer calculates and is able to purchase, and for supply, the value is the maximum of products put forward for sale.
Another common indicator is price. Consider what is the difference between supply and demand. So, in the first option, the price is represented by the largest amount that a potential buyer is able to pay for the desired product. In the case of an offer, this parameter expresses the minimum required by the seller for his product.
The mentioned characteristics - size and price - are interrelated. Their relationship is formulated in the relevant provisions. The first is the law of demand. Its essence is as follows: the more expensive the product, the less it is in demand. This inverse relationship can be graphically illustrated as follows:
Meanwhile, the law of supply says: an increase in price entails the willingness of the manufacturer to supply more goods, and cheaper products - less. There is a direct dependence of one parameter on another, and the corresponding image will be as follows:
Both laws are formulated taking into account only the main, price, factor, affecting the change in the number of products in demand or offered. Meanwhile, there are other reasons explaining the inconstancy inherent in the categories under discussion.
What is the difference between supply and demand for these additional non-price factors? The fact that demand is also influenced by: the level of welfare of consumers, their personal preferences, the cost of similar goods, seasonality and other nuances. In the meantime, the supply may depend on the degree of production costs, the amount of taxes and subsidies, the technologies used, the expected rise in the price of manufactured products or a decrease in the price of them, etc.
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