Answer to Question #106206 in Microeconomics for kenzie

Question #106206

As a consumer, how does the concept of demand and supply help you?

Expert's answer

The price of a commodity is affected by its demand and supply in the market. Thus, in a competitive market, the unit price of a product will tend to vary and eventually stabilizes at a point where the quantity demanded by customers is the same as the quantity supplied by producers. At the point where the quantity demanded equals quantity supplied is the market equilibrium price and quantity. Here are different scenarios depicting how consumers will be affected by shifts in quantity demanded and supplied of a product.

When quantity demanded increases and the supplied quantity remains constant, the equilibrium price and quantity increases, and thus, the consumer will pay a high unit price.

When quantity demanded decreases and the supplied quantity of a product remains unchanged, the equilibrium price and quantity decreases, and thus, the consumer will pay less for a unit of a commodity.

When quantity supplied increases and the demanded quantity of a product is constant, the equilibrium price reduces while equilibrium quantity increases. Therefore, the consumer will spend less on buying more products.

When the supply of a product decreases, and its demanded quantity is constant, then the equilibrium price increases while the equilibrium quantity reduces. Due to the scarcity of the product, the consumer will pay more to purchase the limited quantity of the product.

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