The demand theorem reflects the relationship between the price of the commodity itself and the demand for the commodity. For normal commodities, when other conditions remain unchanged, there is an inverse relationship between the commodity price curve and the demand. The changing relationship means that when the price of a commodity rises, the demand for that commodity decreases. On the contrary, when the price falls, the demand increases. This is the demand theorem.
The demand and price of a commodity change in opposite directions, that is, the demand decreases as the price of the commodity itself increases, and increases as the price of the commodity itself decreases.
The supply theorem is a theory that explains the relationship between the price of a commodity and its supply. Its basic content is: when other conditions remain unchanged, the supply and price of a commodity fluctuate in the same direction, that is, the supply increases as the price of the commodity itself increases and decreases as the price of the commodity itself decreases. .
Theorem of supply and demand: An increase in supply moves the supply curve to the lower right, the equilibrium price decreases, and the equilibrium quantity increases. A decrease in supply moves the supply curve to the upper left, the equilibrium price increases, and the equilibrium quantity decreases.
It can be summarized as follows: changes in demand cause the equilibrium price and equilibrium quantity to change in the same direction, changes in supply cause the equilibrium price to change in the opposite direction, and the equilibrium quantity changes in the same direction.
Extended information:
Mankiw’s economic principles define the supply and demand theorem as:
Any adjustment in the price of an item will increase the supply of that item. and demand balance.
Note: The supply and demand theorem is not the sum of the supply theorem and the demand theorem. The supply and demand theorem shows the impact of changes in supply and demand on equilibrium; the supply theorem and the demand theorem show the impact of changes in commodity prices on supply and demand.
For most commodities, when other conditions remain unchanged, the supply quantity of a certain commodity and its price fluctuate in the same direction.
In layman's terms, generally speaking, the higher the market price, the seller is willing to provide a larger quantity of products to the market: that is, the higher the price, the greater the supply; the lower the price, the smaller the supply. Supply and price move in the same direction, which is the law of supply. Reflected in the graph, the relationship between the two is an upper left sloping curve.
Factors affecting supply: supply function
1. Factors affecting supply include various economic and social factors that affect the company’s desire and ability to supply. These factors are mainly: price, Quantities and prices of factors of production, technology, and expectations.
2. The supply function is used to express the relationship between factors affecting supply and supply.
The fundamental reason for this fallacy in the law of demand is that neoclassical economics reverses the causal relationship between supply and demand and price, believing that price can determine supply and demand, and that the effect of price on supply and demand is certain.
First of all, logically speaking, it is not the cost that determines supply and demand, but the cost-benefit combination that determines supply and demand.
In addition, from the perspective of the transaction process, price is the result of transaction. Therefore, supply and demand are the cause and price is the effect.
Baidu Encyclopedia - Supply and Demand Theorem
Baidu Encyclopedia - Supply Theorem
Baidu Encyclopedia - Demand Theorem