2 minEconomic Concept
Economic Concept

Demand and Supply

What is Demand and Supply?

A fundamental economic model that describes how the price and quantity of a good or service are determined in a market. Demand represents the quantity of a good or service that consumers are willing and able to purchase at various prices. Supply represents the quantity of a good or service that producers are willing and able to offer for sale at various prices.

Historical Background

The concepts of demand and supply have been central to economic thought since the classical economists like Adam Smith. Alfred Marshall formalized the modern demand and supply model in his 'Principles of Economics' (1890).

Key Points

10 points
  • 1.

    Law of Demand: As price increases, quantity demanded decreases (ceteris paribus)

  • 2.

    Law of Supply: As price increases, quantity supplied increases (ceteris paribus)

  • 3.

    Equilibrium price is the price at which quantity demanded equals quantity supplied

  • 4.

    Shifts in demand curve are caused by changes in factors other than price (e.g., income, tastes, expectations)

  • 5.

    Shifts in supply curve are caused by changes in factors other than price (e.g., input costs, technology, number of sellers)

  • 6.

    Elasticity of demand measures the responsiveness of quantity demanded to a change in price

  • 7.

    Elasticity of supply measures the responsiveness of quantity supplied to a change in price

  • 8.

    Market equilibrium is dynamic and changes in response to shifts in demand and supply

  • 9.

    Government interventions like price ceilings and price floors can distort market equilibrium

  • 10.

    Understanding demand and supply is crucial for analyzing market outcomes and policy impacts

Visual Insights

Demand and Supply: Key Concepts

Illustrates the relationship between demand, supply, and market equilibrium.

Demand and Supply

  • ●Demand
  • ●Supply
  • ●Market Equilibrium
  • ●Government Intervention

Recent Developments

5 developments
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Supply chain disruptions during the COVID-19 pandemic led to shortages and price increases

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Increased demand for certain goods and services due to changing consumer preferences

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Impact of technological advancements on supply chains and production costs

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Government policies aimed at boosting domestic production and reducing reliance on imports

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Analysis of demand and supply dynamics in specific sectors (e.g., agriculture, energy)

This Concept in News

1 topics

INS Reports Domestic Newsprint Production Meets Only 40% of Demand

17 Feb 2026

This news highlights the interplay between domestic supply and demand in a specific market (newsprint). It demonstrates how a supply shortfall can lead to increased reliance on imports, affecting prices and potentially impacting the publishing industry. The news challenges the concept of market equilibrium, showing how imbalances can arise due to insufficient domestic production. It reveals the importance of government policies in supporting domestic industries and ensuring adequate supply to meet demand. The implications of this news are that India needs to strengthen its domestic newsprint production capacity to reduce dependence on imports and stabilize prices. Understanding demand and supply is crucial for analyzing this news because it helps us understand the root causes of the problem (supply shortage) and the potential consequences (higher prices, impact on publishing). It also allows us to evaluate the effectiveness of potential solutions, such as government support for domestic production.

Source Topic

INS Reports Domestic Newsprint Production Meets Only 40% of Demand

Economy

UPSC Relevance

A foundational concept in UPSC GS Paper 3 (Economic Development). Understanding demand and supply is essential for analyzing market behavior, government policies, and economic trends. Frequently asked in both Prelims and Mains.

Demand and Supply: Key Concepts

Illustrates the relationship between demand, supply, and market equilibrium.

Demand and Supply

Law of Demand

Elasticity of Demand

Law of Supply

Elasticity of Supply

Surplus

Shortage

Price Ceilings

Price Floors

Connections
Demand→Market Equilibrium
Supply→Market Equilibrium

This Concept in News

1 news topics

1

INS Reports Domestic Newsprint Production Meets Only 40% of Demand

17 February 2026

This news highlights the interplay between domestic supply and demand in a specific market (newsprint). It demonstrates how a supply shortfall can lead to increased reliance on imports, affecting prices and potentially impacting the publishing industry. The news challenges the concept of market equilibrium, showing how imbalances can arise due to insufficient domestic production. It reveals the importance of government policies in supporting domestic industries and ensuring adequate supply to meet demand. The implications of this news are that India needs to strengthen its domestic newsprint production capacity to reduce dependence on imports and stabilize prices. Understanding demand and supply is crucial for analyzing this news because it helps us understand the root causes of the problem (supply shortage) and the potential consequences (higher prices, impact on publishing). It also allows us to evaluate the effectiveness of potential solutions, such as government support for domestic production.