supply and demand

demand
refers to the relationship between the price of good and services
and the quantity of units all consumer are willing to pay during a
given period of time.
quantity demanded
a quantity of goods or services
consumers would choose to buy at
a particular price.
Law of demand
there is an inverse relationship between price
and quantity demanded.

when the price goes down, the quantity consumers buy will increase.
demand schedule
3 reason why demand curve is downward
sloping
• substitution effect
• income effect
• law of diminishing marginal
utility
 • substitution effect
-changes in price motivate consumers to
buy relatively cheaper substitutes goods.
2. income effect
changes in price affect the purchasing
power of consumer’s income
3. the law of diminishing marginal utility
as you continue to consume a given product, you will
eventually get less addition satisfaction from each unit
you consume.
5 shifters of demand

• tastes/preferences
• number of consumer
• price of related goods
• income
• expectations
supply
Refers to the relationship between the price
of a good or services and the quantity or
number of units all seller in a market would
choose to sell during a given time period.
Quantity supplied
Given quantity of a good or service sellers
would choose to buy at a particular price.
Supply curve
5 shifters of supply

• Price of resources
• Number of producers
• Technology
• Taxes & subsidies
• Expectations !
p l u s
su r
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 If the price balance the amount that
Market consumers plan to buy and the amount
that producers plan to sell.
equilibrium
If the demand is greater than supply
we called it shortage
If the supply is greater than demand
we called it surplus