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Supply and Demand - Coggle Diagram
Supply and Demand
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Excess Supply
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As prices fall, there is an expansion of demand which cuts the surplus and takes the market towards equilibrium
Demand
Demand - Quantity of a good or service that consumers are willing and able to buy at a given price in a given time period.
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Derived Demand - The demand for a factor of production used to produce another good or service, e.g. steel.
The Price Mechanism
Signalling - Prices adjust to demonstrate where resources are required. Prices rise and fall to reflect scarcities and surpluses.
Incentives - Consumers send information about changing wants and needs through choice. Higher prices act as an incentive to raise output as suppliers stand to make a better profit.
Rationing - Prices ration scarce resources when demand outstrips supply. When there is a shortage, price is bid up - leaving only those with a willingness and ability to pay to purchase a product.
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Supply
Supply - Quantity of a good or service that producers are willing and able to supply at a given price in a given time period.
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