Introduction

Economics is a study of how to use limited resource to satisfy unlimited people wants. Demand and supply is the two main concept of the modern economic. Demand is what people want and supply is how many goods available for people want. In free market the price of good is determined by the numbers of consumers and how many products available for them. As the result of that, when consumers understand the law of demand and supply they will have ability to decide when they can buy a product with low price and the suppliers can set the right price of this product and decide how many product they will make. In this case study we will evaluate the theory of demand and supply. We also give an example of demand and supply in food market in Hanoi in storm season.

Theory

Demand and supply might be one of the basic concepts of economics. It is the core of market economy. Demand is the price or quantity of a product or service desired by consumers. The demand relationship refers to the relationship between the price and quantity demanded, which are the price and quantity people willing to pay for. Supply is the amount of products a market produces. The supply relationship represents the relation between the price and quantity supplied, which are the price and quantity suppliers willing to produce. Therefore, price is the main concern for demand and supply to consider increased or deducted, and so demand and supply vary according to the price. According to the law of demand and supply, the higher of a product’s price the more suppliers will produce and the less people will buy. Because of that, the market price is changes. ( Investopedia news and articles, copyright 2010 )

In such a case, the quantity supplied is greater than the quantity demanded and there is a surplus of the good on the market. From the graph we see that if the unit price is $3 (assuming relative pricing in dollars), the quantities supplied and demanded would be:

Quantity Supplied = 42 units

Quantity Demanded = 26 units