Supply & Demand in Civics & Economics

  • Big Ideas

    • Both buyers and sellers respond to price changes.

    • Price changes affect the quantity buyers want and sellers can provide.

    • Supply and demand together, not alone, set prices.

  • I. Price

    • Represents the money exchanged for goods/services.

    • Determined by supply and demand interaction.

  • II. Demand

    • Quantity of goods/services consumers will buy at various prices.

    • Law of Demand: Inversely related; lower prices increase quantity demanded, higher prices decrease it.

    • Factors influencing demand:

    1. Price

    2. Income

    3. Consumer expectations

    4. Preferences

    5. Prices of complementary goods

    6. Availability of substitutes

  • III. Supply

    • Quantity of goods/services producers will offer for sale at different prices.

    • Law of Supply: Directly related; higher prices increase quantity supplied, lower prices decrease it.

    • Factors influencing supply:

    1. Price

    2. Cost of resources

    3. Productivity

    4. Technology

    5. Government policies

    6. Taxes and subsidies

    7. Business expectations

    8. Number of suppliers

  • IV. Equilibrium Price

    • Occurs when demand equals supply.

    • All willing buyers and sellers can transact at this price.

  • Lesson Review

    1. Price: Amount exchanged for goods/services.

    2. Determined by: Interaction of supply and demand.

    3. Demand: Amount consumers will buy.

    4. Law of Demand: More purchases at lower prices.

    5. Supply: Amount producers will sell.

    6. Law of Supply: More production at higher prices.

    7. Equilibrium Price: Where demand equals supply.