Supply and Demand: The Bread and Butter of Economics

Demand

Demand is the buyer's eagerness to buy a product. Demand varies depending on the price of a product. This concept is represented by what is known as a demand schedule.

Demand Schedule for Soda

Price per Can	Quantity of Cans Demanded
10 ₵	5
20	4
30	3
40	2
50	1

The inverse relationship between the price of a product and the demand of the product is known as the Law of Demand. The law of demand can be illustrated graphically by what is known as a Demand Curve.

Basic Demand Curve

What Can Happen with Demand?

1. Change in quantity demanded. This occurs when there is a change in the price of the good. This results in movements up or down the demand curve. 

An increase in price results in movement up the demand curve.
If price decreased, movement done the curve would occur.

2. Change in demand. This can result from a number of factors such as more consumers interested in buying the good, higher income in the population, the cost of comparable goods, etc.

An increase in demand causes the whole demand curve to shift to the right.
If demand decreased, the demand curve would shift to the left.

Supply

Supply is the amount of a product that the seller is willing to sell. Unlike the law of demand, the Law of Supply doesn't follow an inverse relationship. As the price increases, the quantity supplied increases.

Supply Schedule for Soda

Price per Can	Quantity of Cans Supplied
10 ₵	2
20	3
30	4
40	5
50	6

The supply schedule can be graphically represented by the Supply Curve.

Basic Supply Curve

What can happen with supply?

1. Change in quantity supplied. This occurs when there is a change in the price of a good. This results in a movement up or down the supply curve.

An increase in price results in movement up the supply curve.
If price decreased, movement done the curve would occur.

2. Change in supply. This can result from a number of factors such as the number of producers, improvements in technology, government regulations, etc.

An increase in supply causes the whole supply curve to shift to the right.
If supply decreased, the supply curve would shift to the left.

In this post Market Equilibrium and Price Controls we will be examining what you can do by combining the supply and demand curves.

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