Basics
Supply = Quantity of product available for buyers.
Demand = Quantity of product desired by buyers.
Equilibrium = Market-Clearing Price = Point at which Supply and Demand are equal.
Supply
The higher the Price, the higher the Supply
(Producers, eager to make money, will make a product in higher quantities as its price rises.)
The lower the Price, the lower the Supply.
(Producers, not wanting to lose money, will make a product in lower quantities as its price falls.)
Demand
The higher the Price, the lower the Demand.
(Buyers, not wanting to spend too much, will buy a product in lower quantities as its price rises.)
The lower the Price, the higher the Demand.
(Buyers, sensing a bargain, will buy a product in higher quantities as its price falls.)
Practice – Questions
1. According to the above Supply-and-Demand curves, the higher the Price, the higher the:
A. Demand
B. Market-Clearing Price
C. Equilibrium Price
D. Supply
2. According to the above Supply-and-Demand curves, the lower the Price, the lower the:
A. Demand
B. Market-Clearing Price
C. Equilibrium Price
D. Supply
3. According to the above Supply-and-Demand curves, the higher the Price, the lower the:
A. Demand
B. Market-Clearing Price
C. Equilibrium Price
D. Supply
4. According to the above Supply-and-Demand curves, the lower the Price, the higher the:
A. Demand
B. Market-Clearing Price
C. Equilibrium Price
D. Supply
5. According to the above Supply-and-Demand curves, Supply and Demand are equal at:
A. Demand
B. Equilibrium (Market-Clearing Price)
C. Christmas
D. Supply
Practice – Answers
1. D. Supply
2. D. Supply
3. A. Demand
4. A. Demand
5. B. Equilibrium (Market-Clearing Price)