Microeconomics is a branch of economics that deals with market dynamics and behaviours of individual customers and organizations. The concept is mainly concerned with the relationship between sellers and buyers in addition to how demand and supply patterns occur in the market. This paper will focus on the principle of demand and supply by citing an event where the law was applicable.
If businessmen sell their clothes at the market, the price is usually lower than when they do it at the fashion stores in town. As a matter of fact, the price at the stores is almost double the one at the market. The market is located is located at the outskirts of town where operational costs are lower. Renting rooms at the market is far much cheaper than in town. Rental houses in town are charged relatively high. Also, there is cheap labour at the market than in town hence the lower operational.
Therefore, it can be evidently stated that the most probable reason that would account for the difference in prices is the quantity of clothes supplied as well as the operational cost. There are many suppliers of similar products at the market than at the stores hence the lower prices. Market attracts many suppliers than at the fashion stores in town. This reason coupled with the high cost of operating a business in town accounts for the observed discrepancy in pricing.
Supply is the correlation between the price of a commodity and the amount supplied in certain period of time. The graphical representation is supply curve is shown below:
The law of supply suggests that when all factors are held constant, there is direct correlation between the price of a commodity and the quantity being supplied in a certain period of time. Some of the factors that affect the supply include the number of producers in the market, prices of resources as well those of related products.
It is worth noting that sometimes fixing of prices follows the laws of supply and demand of commodities. However, sometimes prices can be unpredictable since there are other factors that influence market dynamics. These laws only hold when all factors al assumed to be constant.