Demand and supply: the price mechanism in a market economy.

Abstract This chapter explains the theories of demand and supply. Factors affecting demand for commodities are discussed, including the price of the commodity, the income of consumers, the changes in the price of competitive and complementary goods, and the tastes of consumers. The significance of the price and income elasticities of demand to agriculture is discussed.

Also explained are the factors affecting supply of commodities, including the price of the commodity, the prices of all the other commodities that are within the firm's production possibilities, the prices of factors of production, the state of technology, and the goals of firms.