Skip to main content

Understanding Supply and Demand in Economics Study Guide

This guide provides a comprehensive overview of supply and demand principles in economics. It covers the law of supply, how supply is represented graphically and in schedules, and the factors that influence supply. It also explains market equilibrium, where supply meets demand, and the concepts of surplus and shortage. The guide is suitable for students and anyone interested in learning the fundamentals of how markets function.

Save this study guide to your study set

Sign up free

Your learning path

Introduction to Economics and Ten Principles

Introduction to Economics and Ten Principles

Economics is the study of how society manages its scarce resources and how people make decisions through ten principles.

  • Scarcity
  • Allocation of resources
  • Trade-offs
  • Efficiency
  • Equality
  • Opportunity cost
  • Rational people
  • Marginal change
  • Marginal benefit
  • Marginal cost
  • Incentives

Fundamentals of Supply, Demand, and Market Equilibrium

Introduction to Supply and Market Competition

This lecture explores the relationship between the price of a good and the quantity supplied through supply schedules and supply curves.

  • quantity supplied
  • law of supply
  • supply schedule
  • supply curve
  • market supply
  • individual supply

Factors Causing Shifts in Supply Curves

The supply curve shifts when factors other than price change, causing an increase or decrease in the quantity supplied at every price.

  • Shifts in Supply Curve
  • Increase in supply
  • Decrease in supply
  • Input prices
  • Technology
  • Expectations
  • Number of Sellers
  • Quantity supplied

Supply and Demand Equilibrium

Equilibrium is a situation in which the market price has reached the level at which quantity supplied equals quantity demanded.

  • equilibrium price
  • equilibrium quantity
  • market-clearing price
  • surplus
  • excess supply
  • shortage
  • excess demand
  • law of supply and demand

Introduction to Graphs and Variables

A graph is a diagram that could reflect a single variable or the relation between two variables to express ideas or interpret patterns.

  • single variable graph
  • two variables graph
  • ordered pair
  • x-coordinate
  • y-coordinate
  • origin
  • scatter plot
  • horizontal axis
  • vertical axis
  • correlation

Two Variables Graph in Economics

In economics, the relation between two variables is analyzed by holding other variables constant to produce a demand curve.

  • demand curve
  • price
  • quantity demanded
  • income
  • movement along the curve
  • shift of the curve
  • slope
  • vertical distance
  • horizontal distance
  • upward-sloping line
  • downward-sloping line
  • horizontal line
  • vertical line
  • straight line
  • curved graph
  • tangent line

Demand Supply Markets and Competition

A market is a group of buyers and sellers where buyers determine demand and sellers determine supply.

  • Market
  • Demand
  • Supply
  • Competitive market
  • Perfectly Competitive Market
  • Price Takers
  • Monopoly Market
  • Price Maker

Fundamentals of Demand and Market Demand

The quantity demanded of a good is determined by price, illustrated through a demand schedule and a downward sloping demand curve.

  • quantity demanded
  • law of demand
  • demand schedule
  • demand curve
  • substitution effect
  • income effect
  • market demand
  • individual demand

Causes of Demand Curve Shifts

The demand curve shifts when changes in variables other than price alter the quantity demanded at every price.

  • Shifts in Demand Curve
  • Increase in demand
  • Decrease in demand
  • Normal good
  • Inferior good
  • Substitutes
  • Complements
  • Tastes
  • Expectations
  • Number of Buyers

Supply and Demand Market Equilibrium

The equilibrium price and quantity depend on the position of the supply and demand curves and how shifts in these curves change the market equilibrium.

  • Equilibrium price
  • Equilibrium quantity
  • Supply and demand curves
  • Demand shifts
  • Supply shifts
  • Excess demand
  • Shortage
  • Costs of production
  • Market equilibrium

Foundations of Economic Principles and Analysis

Microeconomics, Macroeconomics, and Economic Analysis

This content explores the distinctions between microeconomics and macroeconomics, as well as the differences between positive and normative analysis.

  • Microeconomics
  • Macroeconomics
  • Positive Statements
  • Normative Statements
  • Scientific Judgments
  • Differences in Values

The Economist as Scientist

Economics uses the scientific method through observation, theory, and the use of assumptions and economic models to understand the world.

  • Scientific method
  • Observation
  • Theory
  • Assumptions
  • Economic models
  • Circular-Flow Diagram
  • Production Possibilities Frontier (PPF)
  • Microeconomics
  • Macroeconomics

The Circular-Flow Diagram Model

A visual model of the economy that shows how dollars flow through markets among households and firms.

  • Circular-flow diagram
  • Households
  • Firms
  • Markets for goods and services
  • Markets for the factors of production
  • Factors of production
  • Labor
  • Land
  • Capital
  • Flow of dollars
  • Flow of inputs and outputs

The Economist as Scientist and PPF

The economist as scientist uses the scientific method, assumptions, and economic models such as the Production Possibilities Frontier to highlight scarcity, efficiency, trade-offs, opportunity cost, and economic growth.

  • Scientific Method
  • Observation
  • Theory
  • Assumptions
  • Economic Models
  • Circular-Flow Diagram
  • Production Possibilities Frontier (PPF)
  • Factors of Production
  • Production Technology
  • Efficient levels of production
  • Inefficient outcome
  • Unattainable outcome
  • Trade-off
  • Opportunity cost
  • Slope of the PPF
  • Technological advance
  • Scarcity
  • Efficiency
  • Trade-offs
  • Economic growth

Ten Principles of Economics and Productivity

An introduction to how people make decisions and how the economy as a whole works through ten principles of economics and the relationship between productivity and living standards.

  • Ten Principles of Economics
  • Trade-offs
  • Rational People Think at the Margin
  • Incentives
  • Markets
  • Standard of Living
  • Productivity
  • Goods and Services
  • Inflation
  • Unemployment

Inflation and Unemployment Economic Principles

Inflation reflects an increase in the overall level of prices and exists in a short-run trade-off with unemployment.

  • Inflation
  • Printing too much money
  • Demand for goods and services
  • Short-run trade-off between inflation and unemployment
  • Business cycles
  • Economic activity
  • Government spending
  • Taxes

Ten Principles of Economics

Quick questions regarding the ten principles of economics including opportunity cost, market failure, and the invisible hand.

  • opportunity cost
  • market economy
  • property rights
  • market failure
  • externalities
  • distribution of income
  • inflation
  • central bank
  • government failure

Ten Principles of Economics

An introduction to how people make decisions, how people interact, and how the economy as a whole works through ten principles of economics.

  • People face trade-offs
  • The cost of something is what you give up to get it
  • Rational people think at the margin
  • People respond to incentives
  • Trade can make everyone better off
  • Markets are usually a good way to organize economic activity
  • Governments can sometimes improve market outcomes
  • A country's standard of living depends on its ability to produce goods and services
  • Prices rise when the government prints too much money
  • Society faces a short-run trade-off between inflation and unemployment
  • Specialization through trade

Markets and Economic Organization

This lecture explores how people interact through market, command, and mixed economies to organize economic activity.

  • Market Economy
  • Command Economy
  • Mixed Economy
  • Invisible Hand
  • Market Prices
  • Supply and Demand
  • Resource Allocation
  • Decentralized Decision Making

Governments Improving Market Outcomes

Governments can sometimes improve market outcomes by enforcing rules, promoting efficiency, and promoting equality.

  • Rule enforcement
  • Property rights
  • Market failure
  • Efficient allocation of resources
  • Externality
  • Market power
  • Public policy
  • Economic efficiency
  • Economic well-being
  • Income tax
  • Welfare system
  • Equal distribution

Ten Principles of Economics and Decision Making

Economics is the study of how society manages its scarce resources and how people make decisions through trade-offs, opportunity costs, and marginal changes.

  • Scarcity
  • Efficiency
  • Equality
  • Opportunity cost
  • Marginal change
  • Marginal benefit
  • Marginal cost
  • Incentives
  • Trade-offs

Comparative Advantage and Trade Parable

A parable of the modern economy explores how trade and specialization allow individuals to enjoy a greater variety of commodities and more consumption from two goods.

  • Comparative Advantage
  • Trade and Specialization
  • Production Possibilities Frontier
  • Consumption Possibilities Frontier
  • Gains from trade
  • Self-sufficiency

Understanding Absolute and Comparative Advantage

This lecture explores absolute advantage, opportunity cost, and how comparative advantage drives specialization and trade.

  • Absolute advantage
  • Comparative advantage
  • Opportunity cost
  • Specialization
  • Trade
  • Production Possibilities Frontier (PPF)

Make it your own.

Keep these readings and topics in a new study set, or add them to one you already use.

Get started freeLog in