Supply vs Demand

Difference Between Supply and Demand

Supply has a direct relationship with the price of a product or service which means that if the price of the same rises, its supply will also increase and if the price falls, then the same will also fall whereas, demand has an indirect relationship with the price of a product or service which means that if the price of the falls, demand will rise and vice-versa.

Nowadays, people have become very selective with regard to the things that they use, wear or carry. They are indeed very conscious as to what to purchase and what not to buy? A small change in the prices or say in the availability of a certain commodity affects the people very drastically. A small disequilibrium in these two (i.e. demand vs supply) will cause the whole of the economy to suffer.

Demand and supply are perhaps one of the most crucial concepts of economics studied worldwide and it is also the backbone of a huge market economy.

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Supply vs Demand Infographics

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Key Differences

The key differences are as follows –

  • The equilibrium between the price and the quantity demanded of a product or the commodity at a certain period is called as demand. To the contrary, the equilibrium between the price of the product or goods and the quantity that is supplied at a given period is called as supply.
  • While the demand curve as mentioned earlier slopes downward and the supply curve has an upward sloping curve.
  • The paying capacity and the willingness of the buyer at a specific price is demand, while the quantity that is offered by the producers of those goods to its customers or consumers at a specific price is supply.
  • Demand, as stated earlier, has an inverse or say the opposite relationship with supply, that is if demand decreases then supply increases and vice versa.
  • Demand has an opposite or indirect relationship with the price that is if price of the goods increases the demand decreases and similarly if the price of the goods decreases then the demand increases, however, on the flip side, the price has a direct relationship with supply, that is if price decreases then the supply will also decrease and if the price increases supply also increases.
  • Demand does represent the consumer or the customer’s preferences and taste for a product or the commodity that is demanded by him, on the other hand, Supply does represent the firms, which is how much of the good or the commodity is offered by those producers in that huge market.

Comparative Table

BasisSupplyDemand
DefinitionSupply can be defined as the quantity of a commodity that is made available to the buyers or the consumers by the producers at a certain or specific price.Demand can be defined as the desire or the willingness of the buyer along with his ability or say capability to pay for the service or commodityCommodityA commodity refers to a good convertible into another product or service of more value through trade and commerce activities. It serves as an input or raw material for the manufacturing and production units.read more at a specific price.
The LawThe law of supply states that the higher the price of the goods, the higher the quantity will be supplied. Producers are ready to supply more at a higher price and the reason for the same being selling a higher quantity at a higher price will increase their revenue.The law of demand says that, if all other factors remain equal (i.e. ceteris paribus), the higher the price of a product or goods, the lesser the people will demand that product or goods. Speaking differently, the higher the price of the good, the lower the quantity will be demanded.
Graph CurveSince price and quantity move in the same direction, the graph curve for supply will be upward sloping.The curve for demand would be downward sloping and the reason being the quantity and price have an opposite relationship.
Variations EffectsSupply increases with the demand being the same will lead to a surplus situation and when while supply decreases with the demand being the same will lead to shortage scenario.Demand increases with the supply being the same will lead to a shortage situation and when demand decreases with the supply being the same will lead to a surplus situation.
RepresentationSupply can be viewed from the producer perspective.Demand should be viewed from a consumer or the buyer perspective.
Price Impact As the price of the product increases, the supply of the product will also increase thus a direct relationship.As the price of the product increases, the demand for the product decreases thus indicating an inverse relationship.
Time FactorThe supply relationship is a factor of time as time is key to supply because the suppliers must (but they cannot always) react rapidly to a change in price or demand. So, it is very important to try and determine whether the change in price which is caused by the demand will be permanent or temporary.However, unlike the supply relationship, there is no impact on the time factor on the demand relationship.

Final Thoughts

The equilibrium in the quantity supplied and demanded surely helps the firm so that they can stabilize and survive in the huge market for a longer duration while the disequilibrium in these does have many severe effects on the firm or the markets, other products and the whole economy as general will suffer.

Recommended Articles

This has been a guide to the Supply vs Demand. Here we discuss the top differences between supply and demand along with infographics and comparison table. You may also have a look at the following articles –