Supply and Demand

any place where people came together to buy and sell goods or services

combination of desire, ability, and willingness to buy a product

listing showing the quantity demanded at all possible prices that might prevail in the market at a given time

Graph showing the quantity demanded at each and every possible price that might prevail in the market at a given time

• when price increases=demand low quantities
• when price decreases=demand high quantities

a change in the quantity of the product purchased in response to a change in price

price changes always causes a change in qd

• shifting right= increase in demand
• shifting left=decrease in demand

as income rises consumers can buy more at each and every price

more consumers=more demand

new reports or expected prices changes

advertising, celebrity endorsements, trends can cause these shifts

competing products that can be used in place of one another

products that increase the value of other products

the more units of a certain economic product a person acquires, the less eager that person is to buy still more

when a relatively small change in price causes a relatively large change in the quantity demanded

a given change in price causes a relatively smaller change in the quantity demanded

a schedule of quantities that would be offered for sale at all possible prices that could prevail in the market

tells the quantities offered at each and every possible market price

shows that greater amounts will be offered for sale at higher prices

• when price increases=supply increase
• when price decreases= supply decreases

is the change in amount offered for sale in response to a change in price

• shifting right=increases in supply
• shifting left=decreases in supply

change in cost of inputs could cause a change in supply

can increase of workers are more motivated or are trained to work more efficiently

new technology usually shifts curve to the right

when more suppliers enter the market supply increases or vice-verca

• tax on the manufacture or sale of a good=decrease supply
• subsidy(cash payment to rpoducers)=increase supply

• anticipation of future events can affect supply curve
• Two Scenarios
• producers think prices will go up=withhol some of supply (decreases supply)
• producers think prices will go down=sell fast (increases supply)

• increased regulations restrict supply
• relaxed regulations increase supply
• tax on the manufacture or sale of a good=decrease supply

• hurricanes, floods, wildfires decreases supply
• wars and revolutions can have similar effects

small increase in price leads to larger increase in output

small increase in price leads to little chane in quantity supplied

a situation in which prices are relatively stable, and the quantity of goods or services supplied is equal to the quantity demanded

a situation in which the quantity demanded is greater than the quantity suppled at a given price

prices tend to rise towards equilibrium when they is a shortage

qd>qs

a situation in which the quantity supplied is greater than the quantity demanded at a given price

price tends to fall towards equilibrium when there is a surplus

qd>qs

• prices serve as a link between producers & consumers (buyers & sellers)
• prices help to decide the three basic question all societies must face
• prices are an effective way of allocated goods & service

• is the lowest legal price that can be paid for a good or service
• i.e: minimum wage
• usually results in surplus

• is the maximum legal price that can be charged
• i.e: NYC rent
• usually results in shortage