supply vs. demand

(noun)

Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price), resulting in an economic equilibrium of price and quantity.

Related Terms

  • return on capital

Examples of supply vs. demand in the following topics:

  • Explaining Fluctuations in Output

    • In the short run, output fluctuates with shifts in either aggregate supply or aggregate demand; in the long run, only aggregate supply affects output.
    • The level of output is determined by both the aggregate supply and aggregate demand within an economy.
    • Aggregate supply and aggregate demand are graphed together to determine equilibrium.
    • The equilibrium is the point where supply and demand meet to determine the output of a good or service.
    • Supply and demand may fluctuate for a number of reasons, and this in turn may affect the level of output.
  • Macroeconomic Equilibrium

    • In economics, the macroeconomic equilibrium is a state where aggregate supply equals aggregate demand.
    • In economics, equilibrium is a state where economic forces (supply and demand) are balanced.
    • There are four basic laws of supply and demand.
    • The laws impact both supply and demand in the long-run.
    • It is represented on the AS-AD model where the demand and supply curves intersect.
  • Supply Schedules and Supply Curves

    • A supply schedule is a tabular depiction of the relationship between price and quantity supplied, represented graphically as a supply curve.
    • The supply curves of individual suppliers can be summed to determine aggregate supply.
    • One can use the supply schedule to do this: for a given price, find the corresponding quantity supplied for each individual supply schedule and then sum these quantities to provide a group or aggregate supply.
    • The other component is demand.
    • When the supply and demand curves are graphed together they will intersect at a point that represents the market equilibrium - the point where supply equals demand and the market clears.
  • Applications of Elasticities

    • For example, to determine how a change in the supply or demand of a product is impacted by a change in the price, the following equation is used: Elasticity = % change in supply or demand / % change in price.
    • The price is a variable that can directly impact the supply and demand of a product.
    • For inelastic demand, the overall supply and demand of a product is not substantially impacted by an increase in price.
    • An elastic demand curve shows that an increase in the supply or demand of a product is significantly impacted by a change in the price .
    • For elastic demand, when there is an outward shift in supply, prices fall which causes a large increase in quantity demanded.
  • The Influence of Supply and Demand on Price

    • The amount of a good in the market is the supply and the amount people want to buy is the demand.
    • Supply and demand is an economic model of price determination in a market.
    • Since determinants of supply and demand other than the price of the good in question are not explicitly represented in the supply-demand diagram, changes in the values of these variables are represented by moving the supply and demand curves (often described as "shifts" in the curves).
    • The point where the supply line and the demand line meet is called the equilibrium point.
    • Apply the basic laws of supply and demand to different economic  scenarios
  • Impact of Changing Price on Producer Surplus

    • Producer surplus is affected by changes in price, the demand and supply curve, and the price elasticity of supply.
    • Changes in the price level, the demand and supply curves, and price elasticity all influence the total amount of producer surplus, other things held constant.
    • If demand decreases, and the demand curve shifts to the left, producer surplus decreases.
    • Conversely, if demand increases, and the demand curve shifts to the right, producer surplus increases.
    • Examine producer surplus in terms of changes in demand, supply, price, and price elasticity
  • Reasons for and Consequences of Shift in Aggregate Demand

    • In economics, aggregate demand is the total demand for final goods and services at a given time and price level.
    • The aggregate supply-aggregate demand model uses the theory of supply and demand in order to find a macroeconomic equilibrium.
    • The shape of the aggregate supply curve helps to determine the extent to which increases in aggregate demand lead to increases in real output or increases in prices.
    • Likewise, if the monetary supply decreases, the demand curve will shift to the left.
    • The Aggregate Supply-Aggregate Demand Model shows how equilibrium is determined by supply and demand.
  • Promotional Strategies

    • Wal-Mart is an example of a company that uses the push vs. pull strategy.
    • In the first case information is just "pushed" toward the buyer, while in the second case it is possible for the buyer to demand the needed information according to their requirements.
    • The business terms push and pull originated in logistic and supply chain management, but are also widely used in marketing.
    • Wal-Mart is an example of a company that uses the push vs. pull strategy.
    • In markets the consumers usually "pull" the goods or information they demand for their needs, while the offerers or suppliers "pushes" them toward the consumers.
  • Short Run Firm Production Decision

    • When a firm is transitioning from the short run to the long run it will consider the current and future equilibrium for supply and demand.
    • In a perfectly competitive market, the short run supply curve is the marginal cost (MC) curve at and above the shutdown point.
    • The short run supply curve is used to graph a firm's short run economic state .
    • This graph shows a short run supply curve in a perfect competitive market.
    • The short run supply curve is the marginal cost curve at and above the shutdown point.
  • Measuring the Price Elasticity of Supply

    • The price elasticity of supply is the measure of the responsiveness of the quantity supplied of a particular good to a change in price.
    • The price elasticity of supply is directly related to consumer demand.
    • PES = 0: Supply is perfectly inelastic.
    • The price elasticity of supply is calculated and can be graphed on a demand curve to illustrate the relationship between the supply and price of the good .
    • A demand curve is used to graph the impact that a change in price has on the supply and demand of a good.
Subjects
  • Accounting
  • Algebra
  • Art History
  • Biology
  • Business
  • Calculus
  • Chemistry
  • Communications
  • Economics
  • Finance
  • Management
  • Marketing
  • Microbiology
  • Physics
  • Physiology
  • Political Science
  • Psychology
  • Sociology
  • Statistics
  • U.S. History
  • World History
  • Writing

Except where noted, content and user contributions on this site are licensed under CC BY-SA 4.0 with attribution required.