The Law of Demand and

Supply

AND THE MARKET

EQUILIBRIUM
 Law of Demand

The law of demand states that the quantity

demanded for a good rises as the price falls, with all
other things staying the same. Vice versa as the price
increases, the quantity demanded for that product
decreases. The low price of good products
motivatesthe consumer to buy more. When the price
increases, the demand for that good decreases.
 Law of Supply

This means as the price increases, the quantity of

supplied of that product also increases. The high
price of the good serves as motivation for the seller
to offer more for the sale. Thus, when the price
increases, the quantity supplied of the good increases
since the seller will take this as an opportunity to
increase his/her income.
 Market Equilibrium

Equilibrium is a state of balance when demand is

equal to supply. The equality means that the quantity
that sellers are willing to sell is also the quantity that
buyers are willing to buy for a price. As a market
experience, equilibrium is an implicit agreement
between how much buyers and sellers are willing to
transact. The price at which supply and demand are
equal is the equilibrium price.
 International demand and supply

If international trade between Brazil and the United

States now becomes possible, profit-seeking firms
will spot an opportunity: buy sugar cheaply in Brazil,
and sell it at a higher price in the United States. As
sugar is shipped from Brazil to the United States, the
quantity of sugar produced in Brazil will be greater
than Brazilian consumption (with the extra
production being exported), and the amount
produced in the United States will be less than the
amount of U.S.
 Global demand

Global demand is the key category in macro-

economics. Global demand or total demand refers to
amount of money, which the subjects of economy
plan to spend on goods and services at the different
size of income (or in other word - at given prices) in
given period. In literature a shortcut - AD (aggregate
demand) is used very often.