ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The law of supply and demand combines two fundamental economic principles describing how changes in the price of a resource, commodity, or product affect its supply and demand. As the price increases, supply rises while demand declines. Conversely, as the price drops supply constricts while demand grows.

Detailed explanation-2: -If the price of inputs goes up, the cost of producing the good increases. And therefore at each price producers need to sell their good for more money. So an increase in the price of inputs leads to a decrease in supply. Simarly, a decrease in the price of inputs leads to an increase in supply.

Detailed explanation-3: -Demand Equation or Function The quantity demanded (qD) is a function of five factors-price, buyer income, the price of related goods, consumer tastes, and any consumer expectations of future supply and price.

Detailed explanation-4: -Production cost: Since most private companies’ goal is profit maximization. Technology: Technological improvements help reduce production cost and increase profit, thus stimulate higher supply. Number of sellers: More sellers in the market increase the market supply. Expectation for future prices: