for Nature of Competition
updated 2007 Sept 05
this page is for marketing students of Prof. Richardson

Supply & Demand
a way of using a diagram to show the relationship between the number of people that want to buy something at a certain price, and the number of people willing to supply that thing at that price
This is a diagram of the 
Demand Side

the purpose is to show you that as the price gets lower, the demand will increase, and as the price gets higher, the demand will decrease

This is a diagram of the 
Supply Side

the purpose is to represent that as the price gets higher, more people will want to get in this market and supply, cause they can make money 
- when the price goes down, fewer people will want to supply cause they cannot sell it for a decent price

The complete 
Supply and Demand Diagram
shows the Supply Line and the Demand Line and the intersecting Equalibrium Point 

At the Equalibrium Point, the number of people that want to buy at that price ='s the number of people that want to sell at that price

thanks to for the diagrams
Concept of Demand Elasticity
Inelastic Demand is something like gas for your car
- when the price goes down, some people will buy more, but not a lot more
- when the price of gas goes up, there is a small number of people that buy less, but, essentially, people still have to have gas to travel by car, so they will continue buying - so we say the demand is "insensitive" to price
- another way of saying the demand is insensitive is to say the demand does not respond to price
inelastic demand is for things that do not have close substitutes
- the demand curve is very steep because it represents the fact that no matter whether the price is high or low, you will still have almost the same number of people buying
Monopolies often breed situations of inelastic demand cause they sell a product at a price you have to pay cause there is no competition
Elastic Demand is something like a vacation
- when the price goes up, less people will want to buy - cause the demand is "sensitive" to the price
- some of the reasons why a product is "elastic" is because there are alternatives.
- a good example of a product with elastic demand is gold
- when gold is relatively cheap, people will buy lots of gold jewellery, when the price of gold goes up, people switch to silver jewellery
- the demand curve is shallow because this represents the fact that when the price changes, the number of people that will buy changes a lot