This week I've learnt a lot about the demand and supply curves. Things like.. how they link with each other, and how the price of goods and services affects these curves (vice versa). 
The definition for demand is the amount of goods and services that consumers are willing and able to buy at various prices over a period of time. Where as, effective demand is the ability of a consumer to buy these good and services. For example: A person who has high disposable income is able to purchase more goods compare to those that has low disposable income. The amount of money a person earns will show their level of ability to buy the G&S they want. 

This an example of a demand curve: 

Every single one of us would want to buy the cheapest possible goods we want. As you can see, the demand curve diagram here shows it all. When the Price is $0.50 the quantity demanded is 100. However, when the Price is $0.20 the quantity demanded is 400. The demand curve(although this is a straight line) is a downwards slopping curve and it show's the inverse relationship between price and quantity demanded. The lower the price, the more the quantity demanded. A change in price would change the quantity demanded and it involves the movement along the demand curve. 

Shifting of demand curve happens when other factors affecting the demand and not the price of theses goods and services. These factors could be, the amount of disposable income a person has, a rise in complement goods, the trend in the market, natural disasters, war and many more. 

As you can see, the price of the particular good remain constant but the demand curve shift to the left. It shows that price is now not the main factor that affects the quantity demanded. For example, a trend for LV green bags is growing wild. Since the trend for LV green bags is growing in the market. The trend for other bags will reduce. Therefor there will be a shift in demanded curve to the left. Where as the demand curve for LV green bags will shift to the right. This can be an example which is known as substitute goods.

There is another type of demand curve which is very common to the society. The curve is known as exceptional demand curve. It’s an upward slopping curve. The higher the price the more the quantity demanded. For example:  property(speculative goods), shares(speculative goods), branded goods(snob appealing goods) and many more.

Besides demand curve, I've learnt about supply curve too. The definition of supply curve is the amount of goods a producer willing and has to sell at various prices over a period of time. What is sold is actually determined by the demand as well.

This is an example of a supply curve diagram:

The supply curve is an upward slopping curve. It shows that the Price of goods and services produced is proportional to the quantity supplied. As you can see... When the price of a product increases, the quantity demanded is high. Producers set their price high because they can earn more profit. They noticed that their product has a high demand, consumers are willing to buy. Therefore they set the price higher and increase the quantity supplied. As price change, quantity supplied will be changed as well and it involves the movement along the supply curve.

 Factors affecting supply curve to shift are cost of production, technology, efficiency, price of substitute goods or competitive goods, weather, Govt legislation (tax, subsidy) and many more.

I’ve learnt about equilibrium price as well. Equilibrium means balance and equilibrium price: price that a buyers is willing to pay = price that the seller are willing to accept. Well, is known as the market price.

·        The point where both curves intersect with each other is the equilibrium.

·        When supply is more than demand: it’s known as surplus.

·        When demand is more than supply: it’s known as shortage.

The change in equilibrium price is affected my both demand and supply.

This is an example where equilibrium price is changed and it’s affected by the demand. I’ll use vegetables for example. When there is an increase in demand for vegetables due to having a healthier lifestyle, the demand curve will shift to right from D1 TO D2. It signals the producers to grow more vegetables for their consumers; the movement of the demand curve is increased along the supply curve from Q1 to Q2. The price for vegetables will increase from P1 to P2 because people are willing to purchase. Therefore, producers will get to earn more profit.

This is another diagram where the equilibrium price is affected by the supply curve. I’ll use petroleum for an example. Due to scarcity, the supply for petroleum has decreased which shifts the supply curve to the left from S1 to S2. The producers will start setting up the price higher from P1 to P2 in order to earn more profit in the future. Since the price of petroleum became higher, the demand for petroleum is reduced from Q1 to Q2. Consumers may start using other alternatives such as public transport or carpooling in order to save money.

The types of goods I’ve learn during the week are:

Normal goods: The demand on certain good has increased due to higher income.

Inferior goods: The demand on certain good has decreased due to higher income.They can afford better G&S

Interrelationship between markets:

Joint demand: Complement goods. “You need to buy this in order to use that” such as car and petrol, socks and shoes...

Competitive demand: Substitute goods. Such as LV and Gucci, jam and butter.

Derived demand: Occurs when a good is demanded in order to produce another good. Such as Wood and furniture, plastic and Tupperware.

Joint supply:  When two or more goods supplied together. Such as sheep (meat, wool), crocodile( leather bags and meat).

Competitive supply: Producing using the same FOP. Such as Rice and brown rice.

Composite demand: When products has many uses. But one of its uses is very important to the society. If it’s used for other things, it’ll be charged higher compare to before.