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Understanding Supply and Demand: Key Concepts in Economics

Supply and demand are fundamental economic principles that determine the availability of goods and services and their prices. Supply refers to the quantity of products available for consumers to buy, while demand indicates how much of a product consumers are willing to purchase at various prices. Factors such as consumer income, preferences, and market conditions can influence both supply and demand. The relationship between the two forms the basis of price fluctuations in the market, reflecting competition and production costs.

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Understanding Supply and Demand: Key Concepts in Economics

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  1. Supply and Demand

  2. Supply and Demand • Supply – amount of goods/services available to buy • Demand – the amount of a good/service consumers are willing to buy

  3. Supply and Demand Curve

  4. Demand • The quantity of a good or service that consumers are willing and able to but at a specific price • Every consumer has different demands • As the price of a good or service increases, the demand will drop • The opposite is also true

  5. Conditions that create demand • Awareness of product/service • Ample supply • Reasonable and competitive prices • Accessibility

  6. Factors that Affect Demand • Change in consumer income • Change in consumer tastes • Change in the expectations of future conditions • Change in population

  7. Supply • The quantity of a good or service that businesses are willing and able to provide within a range of prices people are willing to pay • As the prices increase, suppliers are more willing to offer more products/services

  8. Conditions that affect supply • A change in the number of producers of the product/service • The price of the related goods • A change in technology • A change in expectations • A change in the costs of production

  9. Price • Determined by many factors, including supply and demand • Prices tend to fluctuate because demand and supply are constantly changing • Price is also influenced by the cost of producing the good or service • Competition also influences price

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