Applied Economics | Price of Basic Commodities | Law of Supply and Demand | SHS

Commodity products are undifferentiated products that offer little or no perceived differences between competitive offerings. These have high levels of substitutability. Sellers have little control over price in such markets especially if there are no significant entry barriers. We all are familiar with the basics of the Law of Demand which states that when the price of a good rises, and everything else remains the same, the quantity of the good demanded will fall. On the other hand Law of Supply states that “when the price of a good rises, and everything else remains the same, the quantity of the good supplied will also rise. So basically these laws, if depicted, graphically show relationship of quantity demanded /supplied to price assuming no change in outside factors.