Laws of Supply and Demand The market price of a good is determined by both supply and demand. In today's world, supply and demand is perhaps one of the fundamental principles that exist for economics and the backbone of a market economy. The supply is represented by what the market can offer. Quantity supplied refers to the quantity of a given good that producers are willing to supply at a given demand price. What determines this interconnectedness is the quantity of the good or service supplied to the market or otherwise known as the supply relationship or supply schedule, represented graphically by the supply curve. In demand planning is represented graphically as the demand curve representing the quantity of goods that buyers are willing and able to purchase at various prices, assuming that all other non-price factors remain the same. The demand curve is almost always represented with a negative slope, which means that as the price decreases, consumers will purchase a greater quantity of the good. Just as supply curves reflect marginal cost curves, demand curves can be described as marginal utility curves. The main determinants of individual demand are the price of the good, the level of income, personal tastes, population, government policies, the price of substitute goods and the price of complementary goods. When a supplier's costs change for a given output, the supply curve shifts in the same direction. For example, suppose someone invents a better way to grow corn so that the cost of corn that can be grown for a given amount decreases. Basically producers will be willing to offer more corn at any price and this shifts the supply curve outward, resulting in an increase in supply. This increase in supply...... middle of paper...... The price of complements, i.e. goods that are used together, is also important. When the price of gasoline increases, the demand for cars decreases. In conclusion, in general the Law of Supply states that when the selling price of a good increases there are more people willing to produce that object. Because a higher price means more profit for the manufacturer and as the price rises, more people will be willing to produce the item when they see that there is more money to be made. Meanwhile, the Law of Demand states that when the price of an item falls, its demand will increase. When the price drops, people who couldn't afford the item can now buy it, and people who weren't willing to buy it before will also buy it at the lower price. Additionally, if the price of an item drops enough, people will purchase more of the product and even find alternative uses for the product.