Understanding Market Dynamics: Demand and Supply

Definition of a Market

In economics, the term market refers to the set of offers for certain goods or services that will meet the corresponding demands when exchanges are performed using money. Market players are called buyers or sellers (or oferentes).

Major Market Groups

There are two large groups of markets:

• Consumer goods and services markets.
• Factor markets or productive resources.

Goods and Services Market

In the market for goods and services:

• The plaintiffs (demanders) are families or households.
• The bidders (suppliers) are businesses.

An interchangeable lens is a good or service in exchange for which you have to pay a price.

Factor Markets

In factor markets, the situation is reversed:

• The complainants (demanders) are production companies that need resources for their activity.
• The bidders (suppliers) are families.

Understanding Demand

A demand for a commodity is the amount of the asset a potential buyer (plaintiff) would be willing to buy at a specified price during a concrete period.

Factors Influencing Quantity Demanded

The quantity demanded of a good or service will be influenced, among others, by:

a) Price of the Good

We can expect that the higher the price, the less the good is demanded. The relationship between the price of a good and its demand is inverse.

b) Level of Income of the Claimant

In this case, the relationship is usually straightforward because as income increases, the amount demanded also tends to increase.

c) Prices of Other Related Goods

1. Complementary Goods: When the price of one good increases, the demand for its complementary good decreases.
2. Substitute Goods: When the price of a good increases, the demand for its substitute rises.

d) Consumer Preferences

Consumer preferences significantly affect demand.

Understanding Supply

The bid (supply) is the amount of a good or service that the producer or trader is willing to sell at a certain price. As set forth in the application:

• The sum of the individual bids is the market bid (market supply).
• Supply must necessarily have a variable temporal flow dimension.
• Supply measures desired, hypothetical quantities at certain prices.

Factors Influencing Quantity Supplied

The quantity of a particular good or service supplied is mainly affected by the following factors:

a) Price of the Goods

The higher the price of the property, the greater the amount offered.

b) Prices of Related Goods

We can assume that if the prices of related goods increase, the supply will decrease.

c) Prices of Production Factors

With an increasing price of a productive factor, the supply of the good decreases.

d) Status of Technology

Technological progress provides for an increasing supply of goods and services at all levels.