Demand & Supply

Why does a bottle of water cost ₹20 at a shop but ₹100 at a movie theater? Demand & Supply.

1. Demand

Demand is the quantity of a good that consumers are willing and able to buy at different prices.

Law of Demand: As price increases, demand decreases (and vice versa).

Example:

• Petrol at ₹90/L: People buy 100 L.
• Petrol at ₹110/L: People buy 80 L.

Demand Curve

A downward-sloping curve.

• X-axis: Quantity.
• Y-axis: Price.

2. Supply

Supply is the quantity of a good that producers are willing to sell at different prices.

Law of Supply: As price increases, supply increases (More profit incentive).

Example:

• Wheat at ₹20/kg: Farmers supply 1,000 kg.
• Wheat at ₹30/kg: Farmers supply 1,500 kg.

Supply Curve

An upward-sloping curve.

3. Equilibrium (Market Clearing Price)

The point where Demand = Supply. This is the Market Price.

Example:

• At ₹25/kg, Demand = 1,200 kg, Supply = 1,200 kg.
• Equilibrium Price: ₹25.

What if Price is NOT at Equilibrium?

A. Price Too High (e.g., ₹30/kg):

• Supply > Demand (Surplus).
• Sellers reduce price to sell excess stock.

B. Price Too Low (e.g., ₹20/kg):

• Demand > Supply (Shortage).
• Buyers compete, pushing price up.

4. Shifts in Demand & Supply

Demand Shifts (Entire curve moves)

Increase in Demand (Curve shifts RIGHT):

• Income increases.
• Product becomes trendy (iPhone).
• Population grows.

Decrease in Demand (Curve shifts LEFT):

• Recession.
• Substitute becomes cheaper (Android vs iPhone).

Supply Shifts

Increase in Supply (Curve shifts RIGHT):

• Better technology (More production).
• Good weather (Agriculture).

Decrease in Supply (Curve shifts LEFT):

• Natural disaster.
• Govt bans imports.

5. Real-World Examples

A. Onion Prices in India

• Monsoon fails → Supply decreases → Price shoots up to ₹100/kg.
• Good harvest → Supply increases → Price drops to ₹20/kg.

B. IPL Tickets

• High Demand (India vs Pakistan match) + Limited Supply (Stadium capacity) = ₹10,000+ tickets.

C. COVID Masks (2020)

• Demand exploded → Shortage → Prices increased 10x.
• Supply ramped up → Price normalized.

7-Day Action Plan

Day 1: Observe prices at a local vegetable market. Ask vendors why tomato prices are high this week.
Day 2: Draw a Demand curve on paper. X = Quantity, Y = Price. Mark 5 points.
Day 3: Read about "Substitute Goods" (Tea vs Coffee) and "Complementary Goods" (Petrol and Cars).
Day 4: Watch a YouTube video on "Market Equilibrium".
Day 5: Understand "Inferior Goods" (Demand decreases as income rises, e.g., low-quality rice).
Day 6: Check Gold prices over 1 year. Was it demand (Jewelry season) or supply (Mining output)?
Day 7: Read a news article on "Fuel Price Hike". Identify if it's a supply issue (Crude oil production) or demand (More cars).

Quiz

---

💡 Final Wisdom: Demand & Supply is not just economics. It's life. Jobs, relationships, real estate — everything follows this law.