Demand, Supply and Market Equilibrium
Demand
Supply
Market Equilibrium
Law of Demand
The Demand Curve
Other things equal, as price falls, the quantity demanded rises, and as price rises, the
quantity demanded falls
All points plotted of a demand schedule
Market Demand
Horizontal summation of individual demand curves of all the consumers in the market
Changes in Demand
Increase in Demand = Shift to the Right; Decrease in Demand = Shift to the Left
Determinants of Demand
Change in price of related goods
Change in costumer expectations
Law of Supply
Other things equal, as the price rises, the quantity supplied rises and as the price falls, the
quantity supplied falls
The Supply Curve
All poits plotted from supply schedule
Changes in Supply
Increase in Supply = Rightward Shift; Decrease in Supply = Leftward Shift
Determinants of Supply
Resource Prices Increase = Supply Decrease; Resource Price Decrease = Supply Increase
Technology Increase = Supply Increases
Sellers Decrease = Supply Decrease
Equilibrium occurs where the demand curve and supply curve intersect
Productive Efficiency
Producing goods in the least costly way
Using the best technology and right mix of resources
Efficient Allocation = Productive Efficiency and Allocative Efficiency.