DEMAND-SUPPLY

When i was in my 7th class,I read about Demand and Supply relation in my Economics subject.
At that time,I dont know what are they.

At that time,i just mugged them.also didnt have any curiosity to learn it.

First of All,whole science is dependent on NEWTON LAWS
Similarly,Whole Economics,MBA,Finance is dependent on SUPPLY-DEMAND relation.

In this Post,I will try to explain
1.What is demand and supply?
2.What is Inflation?
3.What is Deflation?
4.What is HyperInflation?


Demand-Supply relation:
It states that,

If Demand of an Item is High (or increasing) and Supply remains constant,it means the Cost of an Item will also increase and vice versa.

Similarly,if supply of item is Less,but Demand remains Constant,it means the Cost of an item will Increase
and vice versa.

Why is that???
let explain it with example.

lets intial stage is
A shopkeeper has 10 mangoes,he sells mangoes at 10/- each and 10 persons came to his shop to buy.

On next day,say 50 persons came to buy them.
What he will Do??
He will just increase the Cost of mangoes because his idea is, "A PERSON WHO REALLY NEEDS MANGO WILL BUY IT.


Inflation:
Inflation is Price Rise.
In hindi (Mehengayi).
Inflation is depedent on SUPPLY and DEMAND Relation.




Deflation:
Just Opposite of PRICE RISE.


Inflation should not be Zero.
it must be positive.
because if Inflation is zero,it means neither SUPPLY NOR DEMAND increased or both increased propotionally.
Lets take example of Onions,
if the cost of onion is same even after 1 year.It means neither the demand nor supply increased.
Which means,Supply is constant.
It implies,Production is constant.
which means,Country didnt developed since 1 year.
which is not a good indicator for Country's economy.

Just imagine same example,with whole economy i.e all products into picture.how adversely affects ones country's economy.

So inflation should be positive but in limits.



Hyperinflation:
As I said the last line,Inflation should be positve but in limits.
Just imagine,If inflation is not in limits.
if inflation increased exponentially,then it said to be HYPERINFLATION.

HYPERINFLATION is disastrous for Country.

If RBI Prints money and give it to everybody??

Did you ever got a doubt ,why dont our govt print whole money and give it to public,so that every body will be RICH???

Lets assume,Govt prints the whole money and give it to whole public (personally,from beggar to rich person)

So,every body is rich now.
Since i have desire to buy a CAR ,so tomorrow i will go to the showroom to buy it.But there would me so many other persons like me (who have the similar desire)


On first day,Every body buy the car. Shopkeeper is happy,
On second day,again 100 persons came to buy car, they were sold.
Shopkeeper is still happy now.

On third day,Stock of car is decreased now,200 persons came there but shopkeeper unable to provide a car to every body ,because of less stock

So next day shopkeeper ordered,again same process repeats.

COmpany of CAR has two options,
(from SUPPLY-DEMAND relation..........do you what is dis??? if not follow this link)

1.Increase the cost of car
2. INCREASE the SUPPLY of CAR


 CASE 1:
 So,COMPANY OF CAR will have to increase the COST of CAR (by say 10K),because DEMAND is more
 (The one who really needs the car will only buy it,not the one who has a DESIRE to buy,so he will increase the cost of car)

but again most of person will be able to buy it,so again COST OF CAR increases,

so again cost of car increases,again and again.

so the CAR which is available at 3L ,will be now 5L-6L (double of intial )
this known HYPERINFLATION 



CASE 2: Increase the Production of CARS

Lets the company didnt increased the price,so it decied to increase the production of CARS.

So,they need more resources for production,and more machinery,

and, machinery cannot be increased in 1 night....its a very very slow process.

so to tackle situation,company will adjust with their machinery (as they have earlier)
so overtime has to be done by employees to meet the requirements.
even if employee do the work for 24hrs,they wont meet the demand of CARS.



So,the only option left with them is to increase the price of CAR.
which is known as hyperinflation