DEMAND, SUPPLY AND MARKET EQUILIBRIUM.

Demand.

- The quantities people are willing and able to buy at various quantities.

The Law of Demand.

- This states that there is an inverse relationship between price and quantity demanded.

What Causes a "Change in Quantity Demanded"?

- Change in price.

What Causes a "Change in Demand"?.

1) Change in buyer's taste (advertisement).

2) Change in the number of buyers (population).

3) Change in the price of related goods.

    - Complimentary Goods (go together).

    - Substitute Goods.

4) Change in income.

    - Normal Goods (increase in income that causes an increase in demand). 

    - Inferior Goods (increase in income that causes a fall in demand).

5) Change in expectations (looking at the future). 

Supply

- The quantities that producers or sellers are willing and able to produce at various prices.

The Law of Supply

- This states that there is a direct relationship between price and quantity supplied.

What Causes a "Change in Quantity Supplied"?

- Change in price.

What Causes a "Change in Supply".

1) Change in expectations.

2) Change in the number of suppliers.

3) Change in weather.

4) Change in the cost of production.

5) Change in taxes or subsidies.

6) Change in technology.

Supply Shifts to the Left

1) Cost of production increases.

2) Technology decreases.

3) Taxes increase.

4) Subsidies reduce.

5) Number of sellers decrease.

6) Weather decreases.

Supply Shifts to the Right

1) Cost of production reduces.

2) Technology increases.

3) Taxes are lowered.

4) Subsidies increase.

5) Number of sellers increase.

6) Good weather.

A price ceiling is placed on corn:

A price floor is placed on steak: