Supply and Demand
Supply curve is a simple graph that shows how much of product for
each possible price suppliers are willing to supply per period of time for
each possible price. (Quantity per specific price)
Quantity Supplied is a total amount that all suppliers are willing to
produce and sell at a single specific price per period of time.
Qs=a+bPs “a” is the horizontal intercept “b” reciprocal of the slope
The demand curve is the graph that tells us the total quantity of
product that buyers are willing to buy at each period.
Quantity demanded – the total amount purchased by all buyers at a
single specific price.
Qd=c-dPd P-demand price in general Q-quantity demanded c-
Market Equilibrium has no tendency to change. Both buyers and
sellers are satisfied (lim). Market is in equilibrium when demand and
supply are in counterbalance.
Supply curve: when price increases, the quantity supplied also
increases (directly proportional)
Demand curve: when price increases the quantity demanded
decreases (inversely related)
Point of intersection between supply and demand graphs shows:
Equilibrium price- a price at which a good will sell Equilibrium quantity- a quantity of a
good that will be sold
Excess supply- when prices exceed the
equilibrium price, there is excess supply, or
surplus, which is equal to the difference
between quantities supplied and quantity
Excess demand –when price lies below the
equilibrium price there is excess demand or
shortage, which is the difference between
quantities demanded and quantity supplied.
Equilibrium process depends on competition between small buyers and
sellers. If all sellers are small no sellers have an ability to in