The demand schedule (or demand curve) shows the relationship between the market price of a good and the quantity demanded of that good, other things being constant (ceteris paribus). The law of downward-sloping demand: when the price of a commodity is raised, buyers tend to buy less; when price is lowered, quantity demanded increases. This occurs due to two reasons: Substitution effect — when price rises, consumers switch to cheaper alternatives (if dal price rises, eat more vegetables). Income effect — higher prices make consumers feel poorer, so they cut back spending. The market demand curve is found by adding together the quantities demanded by ALL individuals at each price.

The supply schedule (or supply curve) shows the relationship between its market price and the amount of a commodity that producers are willing to produce and sell, other things being constant. Supply curve slopes upward to the right — higher prices attract more production (profit motive). Forces behind supply include: cost of production (prices of inputs like labour, energy, machinery), technological advances (lower inputs needed for same output), prices of related goods (if one model’s price rises, production shifts there), government policy (environmental rules, taxes, trade policies) and special factors (weather, market structure, future price expectations).

Market equilibrium comes at the price at which quantity demanded equals quantity supplied. At that equilibrium price, there is no tendency for price to rise or fall. The equilibrium price is also called the market-clearing price — all supply and demand orders are filled, books are “cleared” of orders. In the apple example from the textbook: Equilibrium at Rs. 300 (12 million boxes demanded = 12 million supplied). Above Rs. 300 → surplus (excess supply) → price falls. Below Rs. 300 → shortage (excess demand) → price rises. The equilibrium point is the intersection of demand and supply curves.