Economics - Supply and Demand Revision

Supply

The quantity of a good/service that all firms in a particular industry are willing and able to offer at various price levels at a given point in time.

Demand

The quantity of a good/service that consumers are willing and able to purchase at various price levels at a given point in time.

Law of Supply

A higher price leads to a greater quantity supplied and a lower price leads to a lesser quantity supplied.

Law of Demand

A higher price leads to a lower quantity demanded and a lower price leads to a higher quantity demanded.

Equilibrium

Occurs when quantity demanded is equal to quantity supplied, clearing the market.

Contraction/expansion

Change in price

Elasticity

How sensitive quantity is to a change in price

Elasticity of Demand Coefficient

% change in quantity / % change in price

Inelastic Coefficient

< 1

Elastic Coefficient

> 1