Supply and Demand

Demand

• Demand is the quantities people are willing and able to buy at various prices.
• The Law of Demand:
• There is an inverse relationship between price and quantity demands
• As price increases, Quantity Decreases
• Change in price causes a "change in quantity demanded"
• What Causes Change in Demand??
• Change in Buyres Taste (Advertisements)
• Change in number of buyers (Population)
• Change in Income (Normal/Inferior Goods)
• Normal Goods: An increase in income, leads to increase in demand
• Inferior Goods: In increase in income, leads to decrease in demand
• Change in Price of Related Goods (Complementary/Substitute)
• Complementary: Oftenn associated with the product (Peanut Butter and Jelly)
• Substitute: Can be used instead of product (Coke and Pepsi)
• Change in Expectation (Future)

Supply

• Supply is the qualities producers or sellers are willing and able to produce at various supply
• There is a direct relationship between price and quantity supply
• Change in price also causes a "change in quantity supplied"
• What Causes change in supply??
• Change in technology
• Change in weather
• Change in cost of production
• Change in number of sellers 
• Change in taxes or subsidies
• Change in expectation

Supply and Demand Graph

Price Ceiling and Floor