👍 What is demand?
In the marketplace, the price and volume of a product are determined at the level where the price that consumers want to pay or the quantity they want to buy, the price that the producers want to receive or the quantity they want to sell coincide.
Demand here refers to the abstract “desire” that a consumer wants to buy a good or service. When this desire is embodied in the actual "quantity of goods" you buy, it becomes "demand." Assuming the other conditions are the same, the quantity of products people want to buy in a certain period of time depends on the high and low prices of those products.
There is something important here.
The factors that influence the abstract "demand" are different from those that influence the specified "demand."
First, "demand" only affects price if other conditions are the same.
Here are the factors that change demand (abstract needs).
👊 Consumer income
Things that move in the same direction as the desire to buy in proportion to income are called normal goods, and objects that move in the opposite direction in inverse proportion are called inferior goods.
Assuming that your income has increased, being able to buy more of what you didn't buy (normal) is called "normal good", and what you buy less is called "inferior good."
For example, in the past, if your business went well and you ate wine for steak, but now it's getting harder, you ate soju for ramen,
Steak and wine are inferior goods, ramen and soju are normal goods.
👊 Prices of related materials
Products in the market are related. The price of item B is also affected by the price of item A.
At this time, A and B are said to be related to each other, so they are called "associated materials".
And the related material can be further divided into detail,
When the demands of A and B (the desire for consumption) move in the same direction, they are referred to as "complementary goods", and when they move in opposite directions, they are referred to as "substitutes."
When the price of Coca-Cola rises, you can eat Pepsi-Cola instead, so it is a substitute, and when the price of coffee rises, the price of prim also rises.
👊 sign
As consumers' preferences increase, they will want to buy as much, so demand also increases.
👊 Expectations for the future
If you expect the price of a commodity to rise in the near future, demand will increase because you try to buy more before it goes up further,
On the contrary, if you expect to get off, you will sell it quickly before getting off further.
👍 What is supply?
If all other conditions are constant, the supply is proportional to the price.
However, the "supply", the abstract desire of a supplier to sell a product, is influenced by the following factors:
👊 Production factor price
The factor of production refers to wages, rent, and interest, and the higher the price of the factor of production, the higher the cost, so the supply is reduced.
👊 Production technology
As production technology advances, the production cost per unit is reduced. In other words, because it costs less, we reduce the supply to sell more.
👊 Expectations for the future
Suppliers are the ones who sell and make a profit, so if you expect the price to rise in the future, you wait and want to sell at a higher price, reducing supply.
👍 Determination of equilibrium price and the law of supply and demand
The demand-supply graph shows the change in demand and supply according to price.
The place where the demand curve meets the supply curve is the “balanced transaction volume” in the “balanced price”, and it is the point where both consumers and suppliers are satisfied.
If the price is lower than the equilibrium price and there is an excess demand that exceeds the quantity supplied, the supplier can prevent overheating by raising the price.
Conversely, if the price is higher than the equilibrium price and the supply exceeds the quantity demanded, oversupply occurs, the supplier can reduce the price to prevent overheating.
Anyway, the adjustment continues until the equilibrium price converges. This law is called the "law of supply and demand".
But what if a factor other than price changes the desire itself, not the "quantity" of supply or demand?
👊 Changes in supply and demand
🙌 change in demand
Let's say that supply is constant but demand changes.
For example, mask supply remains the same, but if demand suddenly increases, both mask price and volume will increase.
🙌 change in supply
This time, let's say that demand is constant but supply is changing.
For example, if a mask factory's production machine breaks down, people's desire to buy a mask remains the same, regardless of the supply, so masks become rare, increasing prices but decreasing transaction volumes.