Fifty years ago when I was a
student of B. Sc. (Ag), the Professor of Economics taught us the law of supply
and demand giving examples of agricultural products. Later on, I could see it
in real life, how supply and demand operates not only in marketing of goods but
also in every walk of life. In India, there is a severe power shortage in some
states while demand of power for various purposes – domestic, industrial,
agricultural, business etc. is growing but we all know for sure the supply is
limited because of constraints in production. If there is no production, supply
gets limited and hence one has to limit one’s demand. One of the methods of
limiting demand is to save power without wastage. In order to make the people
to use less power, the cost of the power can be increased. When the cost
escalates, people have an inclination to use less power in both domestic and
commercial sectors.
The power shortage has
increased the demand for gadgets like UPS and generators and the supply of
these gadgets has also increased. Therefore when the supply of power is limited,
demands for an alternative are increasing and thus create good marketing for
UPS and generators.
The supply and demand
determine the prices of products. If desire for goods increases while its
availability deceases, their prices rise. On the other hand, if availability of
the commodity increases and the desire for it decreases, the price comes down.
This fantastic economic theory is used as the fundamental rule for marketing
all over the world.
Production costs limit the
supply or increase the price of goods – may be electronic goods, vehicles,
tooth paste, soap, clothes etc. etc. Supply is also determined by the
technology used in the production. New advanced technology is also determining
the supply. Sometimes supply is withheld for creating a scarcity in the market
to get increased price for the commodities. Above all, the number of suppliers
of a particular product counts a lot. Limited numbers control the market price
while larger numbers create competition. Such competition helps the consumers to
go for better products with cheaper cost.
Similarly one of the major
determinants of demand is the income of the consumers. The demands get
increased when people have more money in their pockets. Taste and preferences
also determine the demand. Sometimes consumers expect that the cost of a
particular item may go up in future, so they decide to buy it as early as
possible. Also if the number of potential consumers is large, the demand gets
increased. I find it so fascinating to think of our day to day life linked with
supply and demand theory of Economics. Actually the phrase “supply and demand”
was first used by James Denham-Steuart (1767) in his book: An inquiry into the Principles of Political Economy. Then later on,
many other economists applied this phrase in their own studies.
Hence, supply and demand,
indeed govern our life. One has to plan his or her life according to this
simple economic theory. But who cares about it when one has plenty of money!
Somehow supply and demand are ignored or managed. In fact, life itself is a
management and everyone is good at it.
