Quantity demanded is the amount that consumers plan to buy during a given time period at a particular price.
Quantity supplied is the amount that producers plan to sell during a given time period at a particular price.
The perfect environment for the relationship between demand and supply is market equilibrium of which the quantity demand equals the quantity supply in a reasonable price.
Demand refers to the buying intentions of consumers. The quantity demanded of a good or service is the quantity that consumers are willing and able to purchase, at a particular price and at a particular time. Demand is not the same thing as a want. Demand refers to the actual buying intentions of consumers. An important law in economics is the law of demand. As the price of a good rises, people buy less of it, holding other factors constant. The law of demand describes a negative relationship between price and quantity demanded.
Figure.1 is also helpful to explain the relationship between the oil price and the rising demand.
Figure.1:
Firstly, on the Quantity-axis which stands for the Quantity, the data moved from point Q1 to Q2. This distance means the growth of oil demand. Based on point A, the demand curve was pushed up and crossed with supply curve at point “B” where is at right side of the original one. This phenomenon indicates that the oil price was improved by the demand of oil. In a word, the more oil demands growth, the greater oil price development.
Oil Supply Analysis Supply refers to both the ability to sell and the willingness to sell by the producer. Actually, many factors can determine the quantity and individual supplies. Input prices, technology, expectations. The quantity supplied rises as the price rises and falls as the price falls. With the unexpected increasing in demand of oil consumption, OPEC had increased its collective production.
It requires additional refining capacity, of which there is a shortage. It will cost the producers large amount on the facilities to convert crude petroleum to petrol.
The input price and extra capacity will lead to a higher cost of production and shift the supply curve left, meaning that supply same level of product, the price of the oil will be higher. Furthermore, since the OPEC countries expected the oil price keep in high, they will not tries to produce as much oil as they can. Therefore, the quantity of supply will not increase much. Like Figure.3:
Demand can be shown by a demand curve which shows the maximum quantity demanded at all prices. The demand curve may different in short-run and long run. Quantity demand can be determined by many factors such as price, consumer behavior, prices of related goods and consumer expectations. Figure 4 shows that the quantity demanded of a good falls when the price of the good rises. Economies have become a lot more fuel-efficient over the past 20 years; as a result, spending on petroleum products is a smaller percentage of income.
Figure.4:
Elasticity of Demand and supply in the short run, both the supply and demand for oil is relatively inelastic. Supply is inelastic because the quantity of known oil reserves and the capacity for oil extraction cannot be changed quickly. Demand is inelastic because buying habits do not respond immediately to changes in price. For example, the drivers with old car which spend lots on petrol may just pay higher price.
Elasticity of supply: responsiveness of output to changes in price; computed as the percentage change in the quantity supplied divided by the percentage change in the price. Supply is said to be elastic (inelastic) if the elasticity exceeds (is less than) 1. The more elastic supply is, the more will a change in price increase production.
Elasticity of demand: responsiveness of buyers to changes in price, defined as the percentage change in the quantity demanded divided by the percentage change in price. Demand for luxury items may slow dramatically if prices are raised, because these purchases are not essential and can be postponed.
Elasticity of demand: responsiveness of buyers to changes in price. Demand for luxury items may slow dramatically if prices are raised, because these purchases are not essential, and can be postponed. On the other hand, demand for necessities such as food, telephone service, and emergency surgery is said to be inelastic. It remains about the same despite price changes because buyers cannot postpone their purchases without severe adverse consequences.
Elasticity of supply: responsiveness of output to changes in price. As prices move up, the supply normally increases. If it does not, it is said to be inelastic. Supply is said to be elastic if the rise in price means a rise in production.
