Question 2 - 3 Marks Questions - Chapter 1 Class 7 Economics - Introduction to Demand and Supply - Economics

What is the law of supply and demand?

Answer:

Answer by Student

• The law of supply and demand is a rule that tells us how the price of something changes when people want more or less of it. It says that:
• When the price of something goes up, people want to buy less of it, but people want to sell more of it.
• When the price of something goes down, people want to buy more of it, but people want to sell less of it.

Detailed Explanation by Teachoo

• The law of supply and demand is a rule that explains how the market works. The market is where buyers and sellers meet to exchange goods and services. The law of supply and demand says that the price and quantity of a product are determined by the interaction of supply and demand. The law of supply and demand says that when the price of a product goes up, the quantity supplied goes up and the quantity demanded goes down, and vice versa. This means that producers and consumers respond to changes in price by adjusting their production and consumption levels.
  
  
• When the price of something goes up, people want to buy less of it, but people want to sell more of it. This means that when something becomes more expensive, people do not want to spend a lot of money on it, so they buy less. But the people who make or sell that thing want to earn more money from it, so they try to sell more. For example, if the price of a pizza goes up from $10 to $15, you may not want to buy pizza as often as before, because it is too costly. But the pizza shop may want to sell more pizzas, because they can make more profit from each pizza.
  
  
• When the price of something goes down, people want to buy more of it, but people want to sell less of it. This means that when something becomes cheaper, people want to take advantage of the low price and buy more. But the people who make or sell that thing do not want to lose money from it, so they try to sell less. For example, if the price of a movie ticket goes down from $10 to $5, you may want to watch more movies than before, because it is a good deal. But the movie theater may not want to sell too many tickets, because they will earn less money from each ticket.