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Demand
• Amount of goods or services a person is willing
and able to buy
• Must not only want the good, but also be able to
pay for it
• The law of demand states that consumers buy
more of a good when its price decreases and less
when its price increases.
Market Demand Curve
Demand
Demand Schedule
Price per slice (in dollars)
3.00
2.50
2.00
1.50
1.00
Demand
.50
0
0
50
100
150
200
250
Slices of pizza per day
300
350
Market Demand Curve
Demand Schedule
Price per slice (in dollars)
3.00
2.50
2.00
1.50
1.00
Demand
.50
0
0
50
100
150
200
250
Slices of pizza per day
300
350
Supply
• The sellers side of the equation
• Supply—the amount producers are willing to offer at
various prices at a given time
• Quantity supplied—the amount producers are willing to
offer at each particular price
• According to the
Price
Supply
law of supply,
As price
Quantity
suppliers will offer increases…
supplied
increases
more of a good at a
higher price.
Price
Supply
As price
falls…
Quantity
supplied
falls
Supply
Market Supply Curve
Supply Schedule
3.00
Supply
Price (in dollars)
2.50
2.00
1.50
1.00
.50
0
0
50
500
100
1000
150
1500
200
2000
Output (slices per day)
250
2500
300
3000
350
3500
Market Supply Curve
Supply Schedule
3.00
Supply
Price (in dollars)
2.50
2.00
1.50
1.00
.50
0
0
50
500
100
1000
150
1500
200
2000
Output (slices per day)
250
2500
300
3000
350
3500
The point at which quantity demanded and quantity supplied
come together is known as equilibrium.
Finding Equilibrium
Equilibrium Point
Combined Supply and Demand Schedule
$3.50
$2.50
$2.00
Equilibrium
Price
$1.50
$1.00
$.50
Supply
0
50
100
a
Equilibrium
Quantity
Price per slice
$3.00
150
200
Price of
a slice
of pizza
Quantity
demanded
Quantity
supplied
$ .50
300
100
$1.00
250
150
$1.50
200
200
$2.00
150
250
$2.50
100
300
$3.00
50
350
Demand
250
Slices of pizza per day
300
350
Result
Shortage from
excess demand
Equilibrium
Surplus from
excess supply