Understanding the Law of Demand
In this report a detailed analysis will be conducted on the law of demand and law of supply curve. A proper compare and contrast is also going to be conducted on theories and models between 21st century and 20th century.
Law of Demand
The law of demand clearly identifies the fact that when other factors are constant then the price and the quality of the demand of a particular good or service are inversely related with each other. In other words, if the price of a particular product increases, then the demand of the product will be falling down (Salerno 2020). The law of demand is capable of explaining the behavior of the consumers whenever there is a change in the price of a particular product. In a particular market when it is assumed that all the other factors that are capable of affecting demand are constant then at that period of time if the price of the good is increased by a company, then the behavior of the consumers in the market toward the product of the company will be changing. The consumers will be looking forward to have other options to purchase the product at the lower price possible and this decreases the demand of the particular product (Vallejo 2021). A consumer will always hesitate to spend more on a particular product with this fear of losing extra money. Law of demand is very much important in terms of understanding the consumer behavior in a particular market.
Every company faces demand curve for each and every of the products that are associated with it. There are various factors that needs to be taken into account in order to understand the effect of the demand and the effect that is generated by observing the various changes that are implemented in the demand curve. Main two types of factors that can be identified in this context is the change in demand and the change in the quantity that has been demanded. There is a particular change in the quantity of the product that is demanded because the particular change in the price of the product and if the various other factors are kept constant then it is identified that the quantity of the demand take a movement along the curve of the demand graph (Dean et al. 2020). In other words, it can be stated that if there is a particular change in the demand of the number of the products that are sold by the company then the number of products that are being sold by the company changes along the demand curve. The number of customers that are associated with the products of the company will stop increasing or decreasing based on the price change that has been implemented in the product. For example, if a particular amount of discount is provided on a product, then customers will be purchasing the product in large numbers and the overall sales of the company will be increasing and the quantity of the product that is being demanded by the customers will also increase. But on the other hand, if the same product increases its price in the future, then it automatically decreases the amount of quantity that is going to be demanded by the customers in the market in which the company operates in.
Factors Affecting Demand Curve
The important aspect that needs to be remembered in this context is that different other factors like the income as well as test of the customer I also going to remain constant and only the price of the product changes.
In this kind of scenario, the change that is going to be identified in the price is going to affect the demand of the quantity but the demand of the product is going to follow the similar curve that was followed before the change of the price (Sepulveda 2020). This particular scenario is known as the movement of the demand curve. The movement of the demand curve can either orca in the upward direction or the downward direction along with the demand curve.
Figure 1: Movement along same demand curve
As stated in figure 1, the price of the commodity is marked as OP and the demand of the product is marked as OM. Now taking a look at the effect of the increase as well as decrease in the product price it can be identified that when the price of the product is increasing from OP to OP” then the demand of the product is also falling towards OL. The demand curve moves upward in this scenario. On the other hand, when the price of the product is decreasing from OP to OP’, the demand of the product is increasing to ON. In this scenario the demand curve is moving downward.
Whenever there is a change in the quantity of a particular product that is demanded at each of the price that is associated with the product due to the various change in other factors a shift is identified in the demand curve. The income rate of the consumer along with the taste of the consumer are also expected to be constant in this scenario. The change in the price of the product along with change in some other factors affect the demanded quantity of the product. In this scenario a different curve is followed by the demand during every change in the price. The curve of the demand can either shift towards right or shift towards the left based on the factors that affect it. Following table can be followed in this context –
Table 1: Change in consumer’s income and demand quantity
The demanded quantities have been plotted as both the demand curves named as DD and D’D’ as identified in Figure 2.
Figure 2: Two demand curves with two different incomes of consumers
From the above figure it can clearly be identified that if the income of the consumer changes, then there is a shift in the price of the demand curve. In this scenario the shift towards the right indicates that there is a particular increase in the desire of the consumers for purchasing the product at all prices. On the other hand, if the income of the consumers falls then the demand curve shift towards the left which identifies the decrease in the Desire of the consumers for purchasing the product.
Law of Supply
Movement and Shifts in Demand Curve
The law of supply is capable of demonstrating the quantities of a product that are sold at a particular price. As compared to the law of demand the law of supply identifies an upward slope which means that if the price is high then the quantity of the product will be supplied more.
When the price of a particular commodity changes then the quantity that is supplied about the product changes in a suitable way if all the other factors are kept constant (Buechner 2018). This phenomenon is known as a change in the supplied quantity and in the aspect of graph as stated in figure 3, the changes occur across the supply curve and a particular change in the price in other aspect causes a change in the supply curve which tends to either expand or contract. If there is an increase in price then the supplied quantity increases which is known as supply expansion. In graph it is explained as upward movement along the same curve of the supply (Oumar 2019). On the other hand, if the price decreases and the supply of the product is decreased then this phenomenon is known as supply contraction. In a graph this is represented as a part of the downward movement along the same curve of the supply.
Figure 3: Movement Along same supply Curve
There are factors that needs to be taken into account in order to understand the shift that is cost in supply curve which are leftward shift and right what safety. The shift mainly occurs because when the price of a product is constant during the study on the various factors that are capable of affecting the supply curve. Rightward shift mainly estimates the fact that a positive effect has been implemented on the curve but on the other hand leftward shift States the effect that negative effect has been implemented on the supply curve (Fitch-Roy, Benson and Woodman 2019). It has already been started that various other factor that are associated with the price as well as its relationship with the commodity and the supply of the commodity. All these factors are capable of having both a direct as well as inverse relationship with the overall quantity of the product that is being supplied as it has been clearly stated in figure 4. Figure for clearly identifies the various reasons due to which shift is identified in supply curve.
Figure 4: Shift in Supply Curve
In the present time economy is among one of the major things that needs to be taken into account for progress in the future. The theories, models and frameworks are the aspects that needs to be taken into account for understanding the billion-dollar investments that are occurring worldwide. The theory of economics are the important tools that helps in tackling global poverty as well as helps in managing planet earth.
The economic theories that are currently taught to the students are among the future aspects that has already been influenced among the practitioners and teachers of the 19th and 20th century. Given the various challenges that has been faced in the 21st century starting from global financial crisis to different climate change it can clearly be identified that there has been a shift in the theories and the various frameworks that are followed in the economical aspect in the global scenario (Wigell, Scholvin and Aaltola 2018). A lot of changes have been implemented in the contemporary economics and that changes can easily be identified in 21st century as compared to that of 20th century. 25 years ago when a student used to study at their respected University then they are subjected to words the Humanities social as well as environmental challenges but in the present time economical aspect is more focused upon and the present Student of The 21st Century are disconnected from the relevance as well as a reality of the social as well as environmental challenges. for over almost a half century GDP is one of the major aspects that has been identified to be of prime importance by economics in terms of measuring the economic progress of a particular area. In the present time it has been identified that GDP is considered to be a false goal that is waiting to almost getting outside in the past (Rego 2018). The present 21st century states that ambitious as well as Global economic goal need to be implemented in which all the needs of the different aspects of the planet can be identified (Chalkiadaki 2018). The main challenge that is currently associated with the 21st century is to create an economy in which local economy can be associated with global economy in which all the essential of human life can be associated with and the life-giving system of the earth can be safeguarded. The main aspect that is currently associated with economy is that is suitable climate as well as fertile soil needs to be implemented and chances must be provided to each and every individual to cope up with any kind of economic fallout that might happen in the future.
Change in Consumer’s Income and Demand Quantity
The modern economic history of the 21st century can be divided into two different areas in which a different set of Ideas has currently dominated the global economy. Each period during the 21st century and 20th century featured second series of economic as well as political crisis hello with different failure of orthodox ideas that help in explaining and responding towards the resultant replacement of the new approach that was identified in the 21st century (Fitzpatrick and Dunn 2019). In other words, it can be stated that there were certain flaws in the economic aspects of 20th century that was changed in the 21st century and this was mainly conducted due to the Kuhn’s theory of Paradigm shift (Cruz-Del Rosario and Rigg 2019). In accordance to this theory change occurs mainly due to the importance of the Critical Mass animal is that has been identified and change also occurs due to the overall development of an alternative theory that helps in identifying the changes that need to be implemented so that a proper paradoxical approach can be implemented which will help in solving a certain problem that was not being solved by following the orthodox methods of the twentieth century. This idea was utilized by Lakatos, in arguing that change in the Science can be implemented in terms of research program so that progressive economic development can be implemented. Implementation of all these useful heuristics was very much important in terms of developing new 21st century theories and it was also possible to create a public policy that is fundamental in terms of creating a proper hypothesis that is going to falsify the information that was previously followed (Gunasekaran, Subramanian and Ngai 2019). The overall development of the economic policy was conducted by the help of political choices as well as social learning that was followed by the policy makers that help in identifying the new goals as well as methods that are essential for improving academic theories and also bring new evidences to solve a particular economical problem in the global scenario.
looking at the present perspective of the Global market it can clearly be stated that the uncertainty of the current economic prediction of 21st century is much more as compared to that of the 20th century. As compared to the political nature of the various policymakers there has been implementation of various programs so that the incumbency advantages of the various previously identified economic theories can be edited by the help of vested interests. It was identified by new policy makers that the prevailing orthodoxy that was present from the start of the 20th century does not apply to the various economic shocks as well as crisis that has been identified in the late 20th century and the starting of 21st century (Saini and Jain 2018). A long-term decline has been identified in the competitiveness of the various significant factors in the industries as well as poor relations in the industrial aspects has been exposed which identifies severe weakness in terms of productive capacity of the various economy especially in the United Kingdom (Hough et al. 2021). Looking at the present perspective of the market it must also be stated that the intellectual and academic underpinning is one of the major aspects that was essential for bringing about changes in the theoretical and modular advancement in economy in order to implement various discourses and narratives that help in expressing the public domain in a wider way (Parfenova, Tchebakova and Soja 2019). The current economic development in theory helped in utilizing the political policies as well as processes in a wide way that helped in the implementation of economic development.
Conclusion
To conclude it can be stated that Demand and Supply curve depends on certain factors that needs to be taken into account in order to understand the change in the curves. The changes in the theories and models can be attributed to the current change in global economy.
Reference List
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