Demand and supply in economics, is one the major concepts and unavoidable element of market economy. Demand for a good or service is that quantity of the good or service which purchases will be prepared to buy at a given price in a given period of time. So it is willing and power to purchase a commodity at a certain price. In economics Supply mean “an amount of a commodity or service, a seller is willing to sell is a certain price and time period.
In economics supply and demand are two basic concepts and backbone of market economy. In terms of economics supply means “an amount of a commodity or service which sellers are willing and able to sell at a given price during a given period of time”. While discussing the topic we should know the difference between stock and supply. Supply means the quantity of goods which sellers are willing to sell in market at a given price.
In economics, factor income, is the personal services can be rendered from factors of production. A labor receives his reward in from of wages and entrepreneur in the form of profit for the services rendered. So we can say the wages and profits are the incomes of the people who are working as a labor and entrepreneur respectively.
Utility is the power of a good or the service by which it can satisfy a human want. According to physics, matter can neither be produced nor destroyed. Therefore, what can produced and consumed is the utility. In terms of economics consumer demands only those products which have utility to satisfy his wants.
Capitalism may be defined as an economic system in which private persons are permitted (subject to regulations by the state) to establish factories, open mills, create banks and other business firms." It may be defined as, "It is a system in which all the means of production and sources of wealth are privatized or denationalized."
The law of variable proportions shows a particular pattern of changes in output and is an explanation of short run production function where some factors remain unchanged. In the history of economics till the time of Alfred Marshall, there were three laws of return, increasing, constant and diminishing laws of return. Much time was wasted in this issue. However, it was later on realized that there are three stages of production
The Modem Theory of pricing of factors of production also known as "Demand and Supply Theory" gives a satisfactory answer to the problem of determining factor prices. According to the theory just as the price of a commodity which is determined by the forces of demand & supply, similarly the price of a factor of production is also determined by the demand for that factor and its supply.
The law is also known as the law of increasing costs. It is one of the important laws of microeconomics. The law of diminishing return indicates that if the number of variable inputs is increased with some fixed inputs, the total output will first increase but then start to decline. It is the third stage of the law of variable proportions. The law is applicable both in agricultural and industrial sectors.