My Essay
Demand, Supply, and Market Equilibrium
The model of supply and demand is the economics profession’s greatest contribution to human understanding because it explains the operation of the markets on which we depend for nearly every-thing that we eat, drink, or consume. The model is so powerful and so widely used that to many people it is economic Markets bring together buyers (“demanders”) and sellers (“suppliers”) and exist in many forms.
The corner gas station, an e-commerce site, the local music store, a farmer’s roadside stand—all are familiar markets. The New York Stock Exchange and the Chicago Board of Trade are markets where buyers and sellers of stocks and bonds and farm commod i ties from all over the world communicate with one another to buy and sell. Auctioneers bring together potential buyers and sellers of art, live-stock, used farm equipment, and, sometimes, real estate After reading this chapter, you should be able to
Demand
Demand is a schedule or a curve that shows the various amounts of a product that consumers will purchase at each of several possible prices during a specified period of time. 1 The table in Figure 3.1 is a hypothetical d e mand schedule for a single co n sumer purchasing a particular product, in this case, la t tes. (For simplicity, we will categorize all espresso drinks as “lattes” and assume a highly competitive market.)
The table reveals that, if the price of lattes were $5 each, Joe Java would buy 10 lattes per month; if it were $4, he would buy 20 lattes per month; and so forth.
The table does not tell us which of the five possible prices will actually exist in the ma r ket. That depends on the intera c tion between demand and supply. Demand is si m ply a statement of a buyer’s plans, or intentions, with respect to the purchase of a product. To be meaningful, the quantities demanded at each price must relate to a specific p e riod—a day, a week, a month. Here that period is 1
The model of supply and demand is the economics profession’s greatest contribution to human understanding because it explains the operation of the markets on which we depend for nearly every-thing that we eat, drink, or consume. The model is so powerful and so widely used that to many people it is economic Markets bring together buyers (“demanders”) and sellers (“suppliers”) and exist in many forms.
The corner gas station, an e-commerce site, the local music store, a farmer’s roadside stand—all are familiar markets. The New York Stock Exchange and the Chicago Board of Trade are markets where buyers and sellers of stocks and bonds and farm commod i ties from all over the world communicate with one another to buy and sell. Auctioneers bring together potential buyers and sellers of art, live-stock, used farm equipment, and, sometimes, real estate After reading this chapter, you should be able to
Demand
Demand is a schedule or a curve that shows the various amounts of a product that consumers will purchase at each of several possible prices during a specified period of time. 1 The table in Figure 3.1 is a hypothetical d e mand schedule for a single co n sumer purchasing a particular product, in this case, la t tes. (For simplicity, we will categorize all espresso drinks as “lattes” and assume a highly competitive market.)
The table reveals that, if the price of lattes were $5 each, Joe Java would buy 10 lattes per month; if it were $4, he would buy 20 lattes per month; and so forth.
The table does not tell us which of the five possible prices will actually exist in the ma r ket. That depends on the intera c tion between demand and supply. Demand is si m ply a statement of a buyer’s plans, or intentions, with respect to the purchase of a product. To be meaningful, the quantities demanded at each price must relate to a specific p e riod—a day, a week, a month. Here that period is 1