Supply affects demand

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    The following quote was found on Investopedia – I liken that site to an online textbook. On a page explaining various aspects of demand it said, “As more of a good or service is available, demand drops and so does the equilibrium price.” (source below). Am I wrong to think that this statement is incorrect? Supply does not affect demand, right? Certainly supply relative to demand impacts the price, but supply in and of itself does not impact demand, does it?

    Thanks again.

    Read more: Demand Theory


    This statement on Investopedia is a classic case of the loose use of terminology leading to error. By “demand” economists mean the entire demand schedule or curve. By “quantity demanded” economists mean the amount bought at each price in the demand schedule or along the demand curve. And similarly for “supply” and “quantity supplied.” When a supply curve shifts to the right or left, it has no impact on the demand curve (as you point out.) But the larger (smaller) supply does push the market-clearing price down (up) as the supply curve slides down (up) the given demand curve and price does affect the quantity demanded.

    The correct statement would be: “A more of good is available, the increase supply pushes the market-clearing price down which increases the quantity demanded of the good.”

    An even better statement would be: If sellers want to make more of a good available to buyers, they must offer the good at lower prices to give incentive to buyers to purchase more of the good. The market clears at a lower price and larger quantity demanded.


    Makes perfect sense. Thank you!


    I hope this is an appropriate place for my question. I want to be sure I am understanding the concept of need and demand.
    I have begun reading Economics in One Lesson, chapter 3, the following:
    “But need is not demand. Effective economic demand requires not merely need but corresponding purchasing power.”

    Is it correct if I restate,
    “Effective economic demand” requires at least two parties to complete a transaction in order to satisfy the conditions of “demand,” or to be realized as “demand.”

    This section is specifically concerned with war is not good for the economy.
    I’ve imagined a store that has a bar of soap for $0.99 plus tax. I could not buy it unless I had the money. In this case my need remains and demand is… not satisfied?

    Conversely, when I acquire $2 and return with the expectation I can buy that bar of soap, I learn that the soap maker’s country was embroiled in war, their facility was bombed, and they will not be making soap for the foreseeable future. I still have a need, and demand remains unsatisfied.

    Am I understanding the conceptual difference between need and demand correctly?

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