SUPPLY AND DEMAND MADE SIMPLE
SUPPLY AND DEMAND MADE SIMPLE
DEMAND
1 The demand curve is downward-sloping because as the price of a good rises, consumers will buy less of it. 2 If the price of a good changes, move along the existing demand curve. Do not shift the demand curve. This is called a “change in quantity demanded.”
3 If anything other than the price of the good changes, shift the demand curve for the good. This is called a “change in demand.” Shift the demand curve to the right (left) to show an increase (decrease) in demand.
SUPPLY
1 The supply curve is upward-sloping because as the price of a good rises, producers will make more of it.
2 If the price of a good changes, move along the existing supply curve. Do not shift the supply curve. This is called a “change in quantity supplied.”
3 If anything other than the price of the good changes, shift the supply curve for the good. This is called a “change in supply.” Shift the supply curve to the right (left) to show an increase (decrease) in supply.
EQUILIBRIUM
1 The “equilibrium price” is the price at which the demand and supply curves intersect.
2 Only at this one price will the quantity demanded be equal to the quantity supplied. The quantity at this price is called the “equilibrium quantity.”
3 At any price above the equilibrium price, there is a surplus of the good because the quantity supplied is greater than the quantity demanded.
At any price below the equilibrium price, there is a shortage of the good because the quantity demanded is greater than the quantity supplied.
DEMAND
1 The demand curve is downward-sloping because as the price of a good rises, consumers will buy less of it. 2 If the price of a good changes, move along the existing demand curve. Do not shift the demand curve. This is called a “change in quantity demanded.”
3 If anything other than the price of the good changes, shift the demand curve for the good. This is called a “change in demand.” Shift the demand curve to the right (left) to show an increase (decrease) in demand.
SUPPLY
1 The supply curve is upward-sloping because as the price of a good rises, producers will make more of it.
2 If the price of a good changes, move along the existing supply curve. Do not shift the supply curve. This is called a “change in quantity supplied.”
3 If anything other than the price of the good changes, shift the supply curve for the good. This is called a “change in supply.” Shift the supply curve to the right (left) to show an increase (decrease) in supply.
EQUILIBRIUM
1 The “equilibrium price” is the price at which the demand and supply curves intersect.
2 Only at this one price will the quantity demanded be equal to the quantity supplied. The quantity at this price is called the “equilibrium quantity.”
3 At any price above the equilibrium price, there is a surplus of the good because the quantity supplied is greater than the quantity demanded.
At any price below the equilibrium price, there is a shortage of the good because the quantity demanded is greater than the quantity supplied.