Supply and Demand

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Supply and Demand

à Supply and demand are the two words that economists use most often.

à Supply and demand are the forces that make market economies work.

à Modern microeconomics is about supply, demand, and market equilibrium.

MARKETS AND COMPETITION

à A market is a group of buyers and sellers of a particular good or service.

à The terms supply and demand refer to the behavior of people . . . as they interact with one another in markets.

SUPPLY AND DEMAND TOGETHER

à Equilibrium refers to a situation in which the price has reached the level where quantity supplied equals quantity demanded.       

SUPPLY AND DEMAND TOGETHER

Equilibrium Price

à The price that balances quantity supplied and quantity demanded.

à On a graph, it is the price at which the supply and demand curves intersect.

Equilibrium Quantity

à The quantity supplied and the quantity demanded at the equilibrium price.

à On a graph it is the quantity at which the supply and

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