Supply and Demand

1
Supply and Demand

• Understand Economics and Economic Systems

2
Marketplace

• In a free market, consumers determine the demand
  of a product.
• Entrepreneurs see the demand and make more of the
  product.
• More supply causes the price to decrease as the
  demand is fulfilled.

3
Supply Defined

• How much of a good or service a producer is
  willing and able to produce at different prices.
• Supply is produced by the businesses in hopes of
  making money.

4
Demand Defined

• An individuals need or desire for a good or
  service at a given price.
• Individuals are willing to consume more of
  product or service at a lower price.
• When the demand is high, competitors see
  opportunity in the market.

5
Supply and Demand Graphs

• People draw supply and demand graphs so that they
  can easily see the relationship between the
  supply and the demand.
• A supply and demand graph is a visual
  representation of supply and demand.
• The graph shows changes in a products demand or
  supply.
• The graph can help predict the performance of the
  product over time.

6
When Supply and Demand Meet

• The point at which the supply and demand curve
  meet is known as the equilibrium price and
  quantity.
• When the price is above the equilibrium price,
  fewer people are willing to buythe price is too
  high.
• When the price is below equilibrium price, many
  people are willing to buy a lot of the
  productthe price is too low. Suppliers may not
  be able to make enough money to cover costs.

7
Equilibrium Price (Market Price)
Supply Curve
Equilibrium/ Market Price
Demand Curve
8
Prices tell businesses what to produce

• The prices of goods and services dictate what
  products are developed, made, improved or
  modified.
• When the price is high, demand falls and
  businesses produce fewer goods.
• When the price is low, demand rises and
  businesses produce more goods to meet the demand.

9
Competition is sparked

• Sellers compete to make a profit
• If a person sees that they can meet a need or a
  want, they enter the marketplace
• They compete with other businesses already
  meeting the need or want.
• OR
• They make a new product and competition follows
  when others enter the marketplace.

10
The Profit Motive

• People and businesses enter the marketplace in
  hopes of making a profit (money).
• This profit motive encourages people to enter
  the marketplace.
• This hope of making a profit is the reward for
  people who take risks by entering the marketplace.