Supply and Demand

Economic definitions for DEMANDDemand: the total amount consumers are willing and able to buy at all prices.

Demand curve: the graphical representation of what consumers are willing and able to buy.

Law of Demand: As price increases/decreases, quantity demanded decreases/increases.PQPQ

Factors that cause demand to change or shiftTastes and fadsIncomeNumber of buyersFuture price expectationsPrice and availability of:Substitutescompliments

Inelastic Demand: Price still moves up and down but Demand stays the same

Economic definition forSUPPLYSupply: the total amount of a good or service producers are able to make at all prices.

Supply curve: the graphical representation of a good or service producers are able to make at all prices.

Law of Supply: as price increases/decreases, quantity supplied increases/decreasesPQPQ

Factors that cause a change in supply:Price of land, labor or capitalTechnologyNumber of other sellersPrice of other goods I could produceTax policy

Equilibrium Point: the point at which the quantity & the price are equal

Economic EquilibriumEquilibrium is the market clearing price and involves the most efficient choiceProducers and consumers make the most of their limited resources at the least costTherefore, producers and consumers act in their own economic self-interest when moving towards equilibriumAt this point the number demanded equals the number supplied

Shortage and SurplusShortage occurs when a good or service is priced below the market clearing priceSupply < DemandSurplus occurs when a good or service is priced above the market clearing priceSupply > Demand

Shortage and SurplusBoth surplus and shortage are inefficientBoth involve missed profit

IRDLIRDL will help you!INCREASE = RIGHTDECREASE = LEFT