"In the corn market, demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms "supply" and "demand" used correctly?
Explain In the first statement, demand and supply should be replaced by quantity demanded(Qd) and quantity supplied(Qs). At the equilibrium of the corn market, Qd = Qs. At the price levels higher than the equilibrium price, Qs> Qd and at lower prices Qd> Qs. By the term demand and supply, the entire demand and supply curves are represented and at a particular price, the total demand curve cannot be above or greater than the supply curve. Qd or Qs may be greater than one another. In the second statement, the words are termed correctly. Changes in demand and supply reflect changes in Qd and Qs at every price level. This results in shifts of the demand and supply curves. For an increase in demand or supply, the curves shift rightwards, whereas for decrease, the curves shift to the left. After these shifts, the price level either increases or falls to bring the market into equilibrium.
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