As the basis of introductory concepts in economics, supply and demand model refers to a combination of buyer’s preferences including demand and seller’s preferences including supply, which together determine market prices and product quantities in any given market. In capitalist society, prices are not determined by the central government, but by the interaction between buyers and sellers in these markets. However, unlike the real market, buyers and sellers do not have to be in the same place, they only need to do the same economic transactions. It is important to remember that price and quantity are the output of the supply and demand model, not the input. It is also important to remember that the supply-demand model applies only to competitive markets, where many buyers and sellers want to buy and sell similar products. Markets that do not meet these criteria have different models that apply to them. The supply and demand model can be divided into two parts: demand law and supply law. According to the law of demand, the higher the supply price, the lower the demand for the product. The law itself stipulates that “all other conditions are the same, as the price of the product rises, the demand decreases; similarly, as the price of the product falls, the demand increases.” This is largely related to the opportunity cost of purchasing more expensive items, with the expectation that buyers will have to give up consuming what they value more to buy more expensive products, and they will probably want to buy less. Similarly, the law of supply is related to the quantity that will be sold at a particular price point. Essentially contrary to the law of demand, the supply model shows that the higher the price, the higher the quantity provided due to the increase of business income, depends on selling more products at a higher price. The relationship between supply and demand depends to a great extent on maintaining the balance between them, in which supply in the market will never be more or less than demand. Think of a new DVD for $15 in modern applications. Because market analysis has shown that current consumers will not spend too much on film prices, the company only issues 100 copies, because the opportunity cost of suppliers is too high for demand. However, if demand increases, prices will also increase, leading to an increase in supply. On the contrary, if 100 DVDs are issued and only 50 DVDs are needed, the price of the remaining 50 DVDs that are no longer needed in the attempt to sell the market will drop. The concepts inherent in the supply and demand model further support the discussion of modern economics, especially when they apply to capitalist society. Without a basic understanding of this model, it is almost impossible to understand the complex world of economic theory.
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