Supply and Demand

What is demand?

Amount a customer is willing to pay at a set price

For demand: as price falls…

quantity demanded rises

For demand: as price rises…

quantity demanded falls

What is a substitute good?

Alternative that creates competition

What is a complimentary good?

Good that is bought alongside another

What is supply?

Amount of a product producers are willing to sell at any given price

For supply: as price falls…

quantity supplied decreases

For supply: as price rises…

quantity supplied increases

What else can influence supply?

• Technological advancements

• Legislation

• Input costs

What is market equilibrium?

Quantity demanded equals quantity supplied

How do you solve the problem of excess demand?

Raise price to decrease demand

How do you solve the problem of excess supply?

Lower price