Price Theory & Supply and demand - ENDED ON SLIDE 13

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Last updated 1:52 PM on 5/12/26
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8 Terms

1
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What is the Law of demand?

  • When there is a lot of people demanding an item, the price for that item will be higher

  • When there not a lot of people demanding an item, the price for that item will be lower

2
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What is the Law of supply?

  • When there is a lot of one item supplied to people, the price for that item is lower

  • When there is a few of one item supplied to people, the price for that item will be higher

3
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What is Demand?

  • Amount of people willing to buy, at a specific price

  • Example:

    • There is a higher demand for charismas decorations in December than in July

      • Because of the high demand for decorations in December consumers are willing to pay higher prices

      • After Christmas the demand drops and consumers are not willing to pay so much for them

<ul><li><p>Amount of people willing to buy, at a specific price</p></li><li><p>Example: </p><ul><li><p>There is a higher demand for charismas decorations in December than in July</p><ul><li><p>Because of the high demand for decorations in December consumers are willing to pay higher prices</p></li><li><p>After Christmas the demand drops and consumers are not willing to pay so much for them</p></li></ul></li></ul></li></ul><p></p>
4
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The demand curve

  • Y-axis is price, X-axis is quantity

  • When the price is low, the quantity demand is high

  • When the price is high, quantity demand is low

  • The relationship between the two makes the curve

<ul><li><p>Y-axis is price, X-axis is quantity</p></li><li><p>When the price is low, the quantity demand is high</p></li><li><p>When the price is high, quantity demand is low</p></li><li><p>The relationship between the two makes the curve</p></li></ul><p></p>
5
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What is Supply?

  • How much of a good service is available for consumers to buy

  • Example:

    • When a fruit is in season the supply is high

      • There is a lot and it’s easily to get at a low price

    • When the fruit is out of season the supply is low

      • It is difficult to get and the price is high

6
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The supply curve

  • Y-axis is price, X-axis is quantity

  • When the price is low, the quantity demand is low

  • When the price is high, quantity demand is high

  • The relationship between the two makes the curve

<ul><li><p>Y-axis is price, X-axis is quantity</p></li><li><p>When the price is low, the quantity demand is low</p></li><li><p>When the price is high, quantity demand is high</p></li><li><p>The relationship between the two makes the curve</p></li></ul><p></p>
7
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Equilibrium price and quantity

  • The price of a product when demands equals supply

  • Its important to find the point at which demand of good or service equals supply

8
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Equilibrium graph

  • The graph that shows the equilibrium price and quantity combines both the demand and supply curve

  • The intersect point is the equilibrium point