Ask a Teacher

Search



demand and supply

Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price), resulting in an economic equilibrium for price and quantity.

The four basic laws of supply and demand are:

  •     If demand increases and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.
  •     If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price.
  •     If demand remains unchanged and supply increases, a surplus occurs, leading to a lower equilibrium price.
  •     If demand remains unchanged and supply decreases, a shortage occurs, leading to a higher equilibrium price.


comments powered by Disqus