Scribd
Upload
6 views2 pages

Notes VJ Puis 93

Supply and demand are key economic concepts that determine market prices and quantities. The law of demand indicates an inverse relationship between price and quantity demanded, while the law of supply shows a direct relationship. Understanding these principles, along with factors influencing shifts in demand and supply, is crucial for analyzing market behavior.

Uploaded by

m.hartgers
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
6 views2 pages

Notes VJ Puis 93

Supply and demand are key economic concepts that determine market prices and quantities. The law of demand indicates an inverse relationship between price and quantity demanded, while the law of supply shows a direct relationship. Understanding these principles, along with factors influencing shifts in demand and supply, is crucial for analyzing market behavior.

Uploaded by

m.hartgers
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

2.

Classroom Notes: Introduction to Supply and Demand in


Economics

Introduction

Supply and demand are fundamental concepts in economics that describe


how prices and quantities of goods and services are determined in a
market economy.

Demand

 Definition: The quantity of a good or service that consumers are


willing and able to purchase at various prices over a period.

 Law of Demand: There is an inverse relationship between price


and quantity demanded—when price increases, demand decreases,
and vice versa.

 Demand Curve: Graphically slopes downward from left to right.

 Determinants of Demand: Factors other than price influencing


demand:

o Income levels (normal vs inferior goods)

o Prices of related goods (substitutes and complements)

o Tastes and preferences

o Expectations of future prices

o Number of buyers

Supply

 Definition: The quantity of a good or service producers are willing


and able to sell at various prices over a period.

 Law of Supply: There is a direct relationship between price and


quantity supplied—when price rises, suppliers are willing to offer
more.

 Supply Curve: Graphically slopes upward from left to right.

 Determinants of Supply: Factors influencing supply aside from


price:

o Production costs (labor, materials)

o Technology improvements

o Number of sellers
o Expectations of future prices

o Government policies (taxes, subsidies)

Market Equilibrium

 The point where supply equals demand at a particular price.

 Equilibrium price: Also known as market-clearing price.

 Equilibrium quantity: The amount bought and sold at this price.

 If price is above equilibrium, surplus occurs (excess supply).

 If price is below equilibrium, shortage occurs (excess demand).

Shifts vs Movements

 Movement along the curve: Change in quantity demanded or


supplied due to price changes.

 Shift of the curve: Change in demand or supply due to non-price


factors.

Elasticity

 Price elasticity of demand: Measures responsiveness of quantity


demanded to price changes.

 Elastic demand means consumers are sensitive to price changes.

 Inelastic demand means consumers are less sensitive.

Applications

 Pricing strategies by firms.

 Government interventions like price ceilings and floors.

 Understanding effects of taxes and subsidies.

 Forecasting market responses to economic changes.

Summary

Supply and demand interplay dictates market prices and quantities. The
laws of supply and demand describe predictable reactions to price
changes, while shifts in demand or supply reflect broader economic
factors. Mastery of these concepts is essential for analyzing market
behavior.

You might also like