ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Introduction. Price is dependent on the interaction between demand and supply components of a market. Demand and supply represent the willingness of consumers and producers to engage in buying and selling. An exchange of a product takes place when buyers and sellers can agree upon a price.

Detailed explanation-2: -Supply is generally considered to slope upward: as the price rises, suppliers are willing to produce more. Demand is generally considered to slope downward: at higher prices, consumers buy less.

Detailed explanation-3: -In a market economy, the producer gets to decide what to produce, how much to produce, what to charge customers for those goods, and what to pay employees. These decisions in a free-market economy are influenced by the pressures of competition, supply, and demand.

Detailed explanation-4: -As demand increases, the available supply also decreases. While an increased supply may satiate available demand at a set price, prices may fall if supply continues to grow. But if supply decreases, prices may increase.

Detailed explanation-5: -The market price of an asset or service is determined by the forces of supply and demand. The price at which quantity supplied equals quantity demanded is the market price. The market price is used to calculate consumer and economic surplus.