Due to the existence of an inverse relationship between the price and the demand of a particular product the curve that illustrates the above relationship slopes downwards. There are three possible explanations for the above. The first explanation is offered by the law of marginal utility which has it that when all the other products consumed by an individual are kept constant, and there is additional consumption of a particular one, the satisfaction derived from the product in question diminishes with every other unit consumed(Friedman, 2017). The income of an individual offers the second explanation. If the income is constant but the price increases, the amount of goods consumed by a given consumer goes down, hence the downward sloping of the curve. Lastly, the presence of substitute goods can also dictate the direction of curve movement. When the prices of a particular product go up, consumers might opt for substitute products that are cheaper. Less of the specific product in question will be bought, hence the demand curve slopes downwards.
An upward sloping supply curve is directly related to the pricing, the number of products sold by the supplier and the amount consumed by the buyers. When the prices go up, the suppliers, in a bid to make more profits increase the supply of a particular product. The supply curve, as a result, curves upwards.
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When the supply and demand of a particular product are equal, a phenomenon called market equilibrium results ("Supply, demand, and market equilibrium | Microeconomics |Khan Academy", 2018). For an equilibrium to be attained, external as well as internal market forces that affect the supply and demand of a product come into play. When there is a surplus in the market due to higher supply than the demand, the sellers are likely to reduce the price so as to clear their stock. When the demand is higher than the supply as a result of the price of a given product being below the equilibrium, buyers are ready to pay more in order to get the product whose supply is low. The suppliers are hence likely to increase the supply. The action of buyers and suppliers when the prices are above or below equilibrium is likely to bring about an equilibrium in the market.
References
Friedman, M. (2017). Price theory . Routledge.
Supply, demand, and market equilibrium | Microeconomics |Khan Academy. (2018). Retrieved from https://www.khanacademy.org/economics-finance-domain/microeconomics/supply-demand-equilibrium
