What is “Demand”? And what is “Supply”?
Demand represents the need for consumers to acquire a product, such as your interest in a product or going to the store to buy it.
While the supply represents the amount of production and distribution of this product in the market. Both are affected by many economic factors, and either increase or decrease in any of them is accompanied by a change in prices.
Factors that affect demand
One of the most important factors is product quality. When you first visit a store and purchase a product, your first-time experience of buying this product determines your impression of this product and its manufacturer.
If you like this product, you will often order it again, and tell your friends about it.
Advertising is one of these factors as well, and it is a way for the company to show its products to its customers. Commercial companies aim to display a commodity image many times on TV screens or on social media pages, because this helps to store and save the image of the product and the name of the company in the customer’s memory, so this pushes people to buy it later even if there were many competing products. This helps increase the demand on this product.
Factors that affect supply
The cost of production plays a major role in determining the quantity supplied of goods. When the cost needed to manufacture a product increases, its price will increase, and the company may sometimes reduce the supply when it expects a segment of consumers to stop buying it. The company may also suffer from the inability to obtain some materials in a large amount due to the presence of political or economic obstacles that the country suffers from, and this of course may force them to reduce the quantity supplied
The relationship between supply and demand
Higher demand, with supply remaining the same, increases prices, and vice versa. Companies try to strike a balance between them by setting reasonable prices that push consumers to purchase all that the company has produced, so that the consumer can buy what he needs without the tendency to reduce his consumption of the product.
