Law of Supply
There is direct relationship between the price of a commodity and its quantity offered fore sale over a specified period of time. When the price of a goods rises, other things remaining the same, its quantity which is offered for sale increases as and price falls, the amount available for sale decreases.The law of supply, in short, states that ceteris paribus sellers supply more goods at a higher price than they are willing at a lower price. For example: If ten people want to buy a pen, and there's only one pen, the sale will be based on the level of demand for the pen. The supply function requires more pens, which generates more production to meet demand.
Law of Demand
We have stated earlier that demand for a commodity is related to price per unit of time. It is the experience of every consumer that when the prices of the commodities fall, they are tempted to purchase more. Commodities and when the prices rise, the quantity demanded decreases. There is, thus, inverse relationship between the price of the product and the quantity demanded. For example: For example, according to the law of demand, other things being equal quantity demanded increases with a fall in price and diminishes with rise to price. Now let us suppose that price of tea comes down from $40 per pound to $20 per pound. The demand for tea may not increase, because there has taken place a change in the taste of consumers or the price of coffee has fallen down as compared to tea or the purchasing power of the consumers has decreased.
Veblen Good
High-status items such as luxury cars, expensive shoes or pricey watches remain appealing to certain consumers as long as prices remain high or increase. A decrease in the price of a Veblen good could cause it to become less exclusive, which may reduce consumers' fondness for it.
We have stated earlier that demand for a commodity is related to price per unit of time. It is the experience of every consumer that when the prices of the commodities fall, they are tempted to purchase more. Commodities and when the prices rise, the quantity demanded decreases. There is, thus, inverse relationship between the price of the product and the quantity demanded. For example: For example, according to the law of demand, other things being equal quantity demanded increases with a fall in price and diminishes with rise to price. Now let us suppose that price of tea comes down from $40 per pound to $20 per pound. The demand for tea may not increase, because there has taken place a change in the taste of consumers or the price of coffee has fallen down as compared to tea or the purchasing power of the consumers has decreased.
Veblen Good
High-status items such as luxury cars, expensive shoes or pricey watches remain appealing to certain consumers as long as prices remain high or increase. A decrease in the price of a Veblen good could cause it to become less exclusive, which may reduce consumers' fondness for it.
Giffen good Consumer item having the paradoxical quality of being in greater demand when its price rises, and lower in demand when the price falls. Typically, a giffen good (such as corn in 19th century England and the alcoholic beverage 'shochu' in modern Japan) is one considered 'essential' by a section of consumers. As its price increases, the consumers have to spend a greater portion of their income to maintain the same level of consumption. Since they cannot now afford the more expensive substitutes, they end up buying more of the same good. The opposite happens when its price falls.
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