Difference between Supply and Demand

Updated on May 27, 2017

Have you ever read or heard of the terms “supply” and “demand”? You probably know them as two of the basic economic concepts, but many of us may have already forgotten what they mean and how the two terms are different from each other. So, what is the difference between supply and demand? We will discuss that in this article.

Descriptions

Supply

The term supply refers to the quantity of goods or services available for sale on the market.

Supply is affected by several factors. Here are the most common ones:

1. The price of the products and services; for example: TechnoMinds, a leader in technology, sells its laptops for $1,500 per unit. Because the price is high, the company may also increase its supply to increase its profits.

2. The availability of a substitute or similar product; for example: SoftType, a company that makes conventional typewriters, recently decided to slow down its production because individuals and business now prefer personal computers and laptops instead of typewriters.

3. The conditions and price of the materials for productions; for example: Balta, a tiny country in Asia, will ban all petroleum-run vehicles starting 2018. This means that the supply of those types of vehicles (in that particular country, at least) will decrease and the supply of solar-powered vehicles may increase.

On the other hand, the term demand refers to the consumers’ desire and willingness to purchase certain goods or services.

Demand, in economics, is affected by a number of factors. A few of these factors are:

1. The price increase of a good or service; for example: if the price of LoveYourLips lipstick increases to $89 per unit, the people’s desire to purchase it may go down.

2. The appeal of the product or service; for example: Anne Smith, an 18-year-old singer-actress, recently posted a video of herself wearing a fashionable plastic tote by ToTe Inc. Because of this, many of her 5 million followers and fans on social media rushed to the store to purchase the item. In this case, the plastic tote became so appealing to a huge group of people that the demand for it increased.

3. The availability of similar or substitute products from competitors; for example: In 2013, a rapper named Jay Pee created high-tech earphones which cost $250 per unit. They sold like hot cakes. Eight months later, another rapper named FoShizzle launched his fashionable and innovative earphones for $200 per item. The demand for Jay Pee’s earphones may go down because the consumers now have the option to purchase from a competitor who offers a similar product for a lower price. However, when Jay Pee had no competition, the buyers’ demand for his earphones skyrocketed because he was the sole supplier of that certain product.

Supply and demand usually go hand in hand. In fact, there is a theory in economics called “the law of supply and demand” which basically means that if the people want more of a particular product (demand), the production of that product (supply) may also go up and the price may also increase, and vice versa.

Supply vs Demand

What, then, is the difference between supply and demand?

Supply means “the available goods or services for sale on the market,” whereas demand means “the buyers’ desire and willingness to purchase certain goods or services.” Both of them are affected by a number of different factors. Supply is affected by the price of the products and services, availability of a substitute or similar good, and the conditions and price of the materials for productions. On the other hand, demand is affected by the price of the goods and services, the appeal of the goods and service, and the availability of similar products from a competitor.

Both of them are affected by a number of different factors. Supply is affected by the price of the products and services, availability of a substitute or similar good, and the conditions and price of the materials for production. On the other hand, demand is affected by the price of the goods and services, the appeal of the goods and service, and the availability of similar products from a competitor.

It is important to note, however, that although the two terms have different meanings, they are somewhat related to each other (the law of supply and demand). This means that the demand for a certain good affects the supply, which then affects the price of that good.

Comparison Chart

SupplyDemand
The available goods or services for sale on the marketThe buyers’ desire and willingness to purchase certain goods or services
Affected by several factors such as the price of the product or service, availability of a substitute or similar good, and the conditions and price of the materials for productionsAffected by the price of the good or service, the appeal of the good or service, and the availability of similar products from a competitor