(a) State the laws of demand and supply. (b) With the aid of a diagram,...
(a) State the laws of demand and supply.
(b) With the aid of a diagram, explain the implications of a change in the quantity demanded of a commodity.
Explanation
(a) The law of demand holds that all things being equal, the lower the price, the larger the quantity demanded or vice versa. On the other hand, the law of supply provides that all things being equal, the lower the price the smaller the quantity supplied of a commodity or vice versa.
(b) A change in the quantity demanded of a commodity means a movement from one point to another on a demand curve. The cause of the change in the quantity demanded is a change in the price of the product under consideration. For example, the price of maize falls from $200 to $150. The quantity demanded increases from 200 bags to 300 bags. A change can either be an increase or a decrease. This is illustrated in the diagram below: