According to the law of supply, price and quantity move along a track in the same direction.
The law of supply basically deals with price and quantity of goods and services. It states that, all other factors being constant, whenever there is increase in the prices of goods and services, it will result to increase in the quantity of goods and services. In other word, when the cost of an item increases, suppliers of such items would want to increase their earnings or profits by increasing the items quantity.
For example, a company that produces a cup will increases the quantity of such item if the prices increases, since the company is looking forward to make more profit.
According to the law of demand, price and quantity move along a track in opposite directions.
The law of demand states that all other factors being equal, when the prices of a good and services is high, the demand for such goods and services will come down. Which means the higher the prices of an item, the lower individual will demand for it.
For example, if the shortage of pineapples in the market leads to higher price, consumers will go for other fruits apart from pineapple. This will certainly result to low demand of pineapples. This is what law of demands means.
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KEYWORDS:
- law of demand
- law of supply
- goods and services
- price and quantity