Consumers want low prices so they can buy more stuff — this is called

demand.

Producers want high prices so they can earn more profit — this is
called supply.

The law of supply and demand is the theory that prices are determined by the relationship
between supply and demand. The law of supply says that when prices rise, companies see more
profit potential and increase the supply of goods and services. The law of demand states that as
prices rise, customers buy less. If the supply of a good or service outstrips the demand for it,
prices will fall. If demand exceeds supply, prices will rise.

DEMANDING LOWER PRICES

To economists, quantity demanded is the amount of the good customers purchase at a given
price. Quantity demanded is a specific number.
On the other hand, demand refers to the entire curve. Demand shows how much is purchased at
every possible price. Demand is an equation or line on a graph that indicates how price and
quantity demanded are related.

The main difference between Demand and Quantity Demanded is that the former refers to the
intention or willingness showed by a buyer with respect to buying any goods or service at any
price as determined by the market or the seller, but on the contrary, Quantity Demanded refers
to the exact number or amount that the customer intends to buy for a particular price only.   

Demand in simple words denotes the quantity or amount of any goods or service which the
customer intends to buy at any given price. This is counted for a specific period of time, like a
month or a year.

It can be shown on a graph in which the two axes happen to be the price of the goods and the
quantity of the goods. 

On the contrary, Quantity Demanded is just a point on the demand graph that we mentioned
earlier. It is the one point at which a specific quantity is being demanded a specific amount at
a specific time period.

Unlike Demand, this is a more definite concept and clarifies the on-point willingness and
capacity of a person to buy a certain thing. 

Parameters of
Demand Quantity Demanded
Comparison
 It denotes the quantity or amount of
any goods or service which the
Meaning
customer intends to buy at any given
price.
It is just a point on the demand graph that
we mentioned earlier. It is the one point at
which a specific quantity is being
demanded.

It appears like a line on which

It appears like a dot only
Appearance multiple quantities for different prices
and represents only one particular quantity.
exist.

Quantity Demanded is a point that

Interrelation This point exists on a line called Demand.
exists on this concept.

It reflects all the available quantities It reflects only one particular quantity for a
Reflects
demanded at different price levels. particular price.

This concept is mostly affected by

On the contrary, this can be affected by the
Affected by things other than price, such as the
price of the goods or services only.
income, etc., of the buyer.

If the demand changes, it will affect Change in the Quantity Demanded

Results in the shape of the demand will bring differences in shape and
curve eventually. movement in the demand curve also

Shifting the demand curve

When one of the things being held constant — income, tastes, and the prices of other goods —
changes, the entire demand curve shifts.

Any rightward shift in the demand curve is an increase in demand, and any leftward shift in
the curve is a decrease in demand.

The factors that shift the entire demand curve are

✓ Consumer tastes or preferences: A direct relationship exists between desirability (consumer

tastes) and demand. Thus, an increase in desirability increases demand.

✓ Income: Income’s impact on demand is a little more complicated. Economists note two
types of goods — normal goods and inferior goods. For normal goods, a direct relationship
exists between income and demand — an increase in income increases demand. This is the
expected, or normal, relationship. For an inferior good, an increase in income decreases
demand; therefore, an inverse relationship exists between income and demand for an inferior
good.
✓ Prices of other goods: Changes in the prices of other goods are also a little complicated. If
the goods are consumer substitutes for one another, they are used interchangeably. Hot dogs
and hamburgers at a picnic are an example of consumer substitutes. A direct relationship
exists between one good’s price and the demand for the second, substitute, good. Thus, when
the price of hot dogs increases, the entire demand curve for hamburgers shifts to the right
(increases). Consumer complements are a second type of goods. Consumer complements are
used together, such as coffee and cream. An inverse relationship exists between one good’s
price and the demand for its consumer complement. As the price of coffee increases, the
amount of coffee you drink decreases. This decrease in the quantity demanded of coffee is
because you’re responding to a change in coffee’s price. And because you’re drinking less
coffee, your demand for cream decreases. The higher price for coffee decreases your demand
for cream — an inverse relationship. Even if the price of cream doesn’t change, you use less
of it.

Supplying Higher Prices

Supply describes the relationship between the good’s price and how much businesses are willing
to provide. Supply is a schedule that shows the relationship between the good’s price and
quantity supplied, holding everything else constant.
Holding everything else constant seems a little ambitious, even for economists, but there is a
reason for that qualification. By holding everything else constant, supply enables you to focus on
the relationship between price and the quantity provided. And that is the critical relationship.

Quantity supplied refers to the amount of the good businesses provide at aspecific price. So,
quantity supplied is an actual number. Economists use the term supply to refer to the entire
curve. The supply curve is an equation or line on a graph showing the different quantities
provided at every possible price.

Changing price
Figure 2-3 illustrates that price and quantity supplied are directly related. As price goes down,
the quantity supplied decreases; as the price goes up, quantity supplied increases.

Shifting the supply curve

When economists focus on the relationship between price and quantity supplied, a lot of other
things are held constant, such as production costs, technology, and the prices of goods producers
consider related. When any one of these things changes, the entire supply curve shifts.

A rightward shift in the supply curve always indicates an increase in supply, while a leftward
shift in the curve indicates a decrease in supply.
The factors that shift the supply curve include
✓ Production costs: Input prices and resulting production costs are inversely related to supply.
In other words, changes in input prices and production costs cause an opposite change in supply.
If input prices and production costs increase, supply decreases; if input prices and production
costs decrease, supply increases. For example, if wages or labor costs increase, the supply of the
good decreases.
✓ Technology: Technological improvements in production shift the supply curve. Specifically,
improvements in technology increase supply — a rightward shift in the supply curve.
✓ Prices of other goods: Price changes for other goods are a little complicated. First, in order to
affect supply, producers must think the goods are related. What consumers think is irrelevant.
For example, ranchers think beef and leather are related; they both come from a steer. However,
as a consumer, please don’t serve me leather for dinner. Beef and leather are an example of joint
products, products produced together. For joint products, a direct relationship exists between a
good’s price and the supply of its joint product. If the price of beef increases, ranchers raise more
cattle, and the supply of beef’s joint product (leather) increases.
Producer substitutes also exist; using the same resources, a business can produce one good or the
other. Corn and soybeans are examples of producer substitutes. If the price of corn increases,
farmers grow more corn, and less land is available to grow soybeans. Soybeans’ supply
decreases. An inverse relationship exists between a good’s price (corn) and the supply of its
producer substitute (soybeans).