It has been a journey of six weeks into the Discussion on Demand and Supply. As stated earlier, it is good to occasionally summarize the proceedings and give a perspective in hindsight so that we understand how much of the subject we have covered.
We began our discussion with having a basic understanding of the Demand and Supply and the laws that govern them. We then understood the concept of equilibrium price and began deriving the relation between the equilibrium price, the supply and the demand - We could summarize the relation in the following four laws which were essentially the summary of the blogs that succeeded the equilibrium price blog:
- If the demand increased while the supply remained unchanged, then the equilibrium price increases
- If the demand decreased while the supply remained unchanged, then the equilibrium price decreases
- If the supply increases with the demand remaining unchanged, then the equilibrium price decreases
- If the supply decreases with the demand remaining unchanged, then the equilibrium price increases
If you would have noticed, we have stuck with a major understanding that the only subject in the study is one object (lemon in our earlier case); in the process we have ignored some of the every essential factors which have a bearing on the demand and supply equations. In the upcoming blogs we would look at inter-relating these and creating a good understanding for the same.
However, there is one important corollary of these laws that we need to understand before we proceed with the relating to the other aspects by involving the external environment.
Read in Kannada: http://somanagement.blogspot.com/2011/03/blog-post_29.html
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