DEMAND, SUPPLY, and

MARKET EQUILIBRIUM

Appendix(chapter 3)

A market demand curve shows the relationship between the quantity demanded and price,

ceteris paribus.

Equilibrium in a market is shown by the

intersection of the demand curve and the supply

curve. When a market reaches equilibrium, there is no pressure to change the

price.

A market supply curve shows the relationship between the quantity

supplied and price, ceteris paribus.

Increases in Demand Shift the Demand Curve

Decreases in Demand Shift the Demand Curve

Increases in Supply Shift the Supply Curve

Decreases in Supply Shift the Supply Curve

A change in demand changes price and quantity in the same direction: An increase in demand increases the equilibrium price and

quantity; a decrease in demand decreases the equilibrium price and quantity.

A change in supply changes price and quantity in opposite directions: An increase in

supply decreases price and increases quantity; a decrease in supply increases price

and decreases quantity.

Predıctıng And Explaınıng Market Changes