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Demand and Supply

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Demand Schedule

  • The demand schedule is a table showing how many units are demanded at different prices

Demand Curve

  • The demand curve is a graph showing how many units are demanded at different prices
  • The demand curve is constructed using the data from the demand schedule

Demand Concepts

  • Prices are signals that influence consumer and producer behavior
  • Prices ration goods and services--higher prices mean that less is demanded
  • The law of demand is a fundamental economic concept--when price goes up, quantity demanded goes down
  • Other factors beside price also influence demand
    • Income--for most goods and services, if people have more money they demand more of the good or service
  • Tastes and preferences--as tastes and preferences change, demand changes
  • Prices of other goods affect demand. For example, a large increase in the price of beef would increase the demand for pork
  • The demand curve assumes that income, tastes and preferences, and prices of other goods do not change

Supply Concepts

  • The supply schedule and supply curve show the relationship between prices and quantities that businesses will supply of a good or service
  • The law of supply is another fundamental economic concept--when prices goes up, quantity supplied also goes up
  • Other factors beside price also influence supply
    • Technology can reduce cost of supplying goods and services
  • If prices of resources used to provide a good or service increase, the quantity supplied of that good or service will decrease
  • The supply curve assumes that technology and prices of resources do not change

Equilbrium or Market Price

  • When demand exceeds supply, there is excess demand and prices will increase
  • When supply exceeds demand, there is excess supply and prices will decrease
  • When supply equals demand, there is no reason for price to change. The price which causes supply and demand to be equal is called the equilibrium or market price.

Minimum Wage Laws

  • If the government sets a minimum wage above the market wage, the result will be unemployment
  • If evaluating minimum wage laws, the impact on those unemployed must be compared to the benefit to those who have jobs at higher wages.

Copyright 2008, by the Contributing Authors. Cite/attribute Resource . factadmin. (2007, October 25). Demand and Supply. Retrieved January 08, 2011, from Free Online Course Materials — USU OpenCourseWare Web site: This work is licensed under a Creative Commons License Creative Commons License