Demand and Supply

We live in a country where maximum people criticize the government for the economic imbalance and give opinions, but understanding the whole economy and running it through is not a cup of tea. As it takes a lot of pressure to handle and the driving person needs to think about the various aspects parallelly as economy affects many sectors, one change in any law causes a huge impact on the nation’s economy. 

So before knowing about how the economy works better to understand the basic terms that are required to understand the broader concept. We will try to understand make you understand the most basic terms in the most relevant way.

Consider you are the head of a village which is totally independent of others, the village don,t need to borrow any commodity from other villages and the needs are fulfilled of all the peoples of the village. Now the village has land which produces more wheat, so 50% of people are occupied for cultivating wheat, now a blunder happens suddenly the people of villages are getting food poison because of the poor quality of wheat cultivated, now most of the people will not have wheat due to food poisoning so due to the less consumption of wheat the already grown wheat is in surplus quantity but no one is ready to purchase that wheat or we can say there is no demand of wheat in the village. Don’t get confused as the villagers are not purchasing the wheat so the access of wheat will be somehow for sale as the producer of wheat will charge less price for the wheat, due to less demand and clearing the surplus wheat. now, question yourself is the demand low because the people are not able to pay? People are able to pay but people are not willing to pay for wheat, as the demand itself says desire, ability and willingness to have a product. Let’s go through another part now, rice is also an essential commodity and the cultivation of rice is half of the wheat in the village, but people needs food in order to be healthy so they started preferring rice more and suddenly the rice was in deficit the present stock of rice was not enough for all so the producers started charging more for the rice, so to people were able to pay even more for the rice, this is a deficit of rice or we can say demand for rice is more. Now understand supply from the same wheat is more so the supply of wheat is more but the demand is too less and in the case of rice the supply is low but the demand for the rice is more that decides the price of the commodity. And these rules are applied all over the world with every commodity and equity too.