Supply and Demand Essay Example | Topics and Well Written Essays - 250 words

Supply and Demand - Essay ExampleThe law of demand in economics states that with exclusively aspects (tastes, expectation, and income) held constant highly expensed commodity will have a low demand (D1). Whereas, that of supply argues that with an make up in supply, the price (P1) of commodity will significantly reduce. An increase in demand (D2) along the nose of supply results to increase in the price (P2) of commodity and a higher equilibrium quantity. Similarly, a decrease in the level of supply (S1) leads to a shift of the demand curve to a high price on the equilibrium and a reduced equilibrium quantity.Efficient market theory refers to an analysis in a free market system regarding behavior of prices. It is tasked with the responsibility of determining whether prices accurately reveal inhering information necessary in determining the proper allocation of limited resources among diverse uses (Slee, 2011).Surplus implies that the subject matter in demand is lesser than tha t supplied whereas shortage exists when the quantity demanded is lesser than that supplied. In addition, in a bit where surplus exist there will be a constant drop of prices similarly, shortage influences change magnitude pricing (Market Equilibrium