Demand and Supply Lecture Notes - AP Microeconomics
Introduction
- Demand and Supply are fundamental concepts in economics.
- They determine the price and quantity of goods in a market.
Demand
Definition
- Quantity of a good that consumers are willing and able to purchase at different prices.
Law of Demand
- Inverse relationship between price and quantity demanded.
Factors Influencing Demand
- Income
- Tastes and Preferences
- Price of Related Goods (Substitutes and Complements)
- Expectations
- Population and Demographics
Shifts in Demand Curve
- Increase in Demand: Curve shifts right.
- Decrease in Demand: Curve shifts left.
Movement Along the Curve
- Caused by a change in the price of the good itself.
Supply
Definition
- Quantity of a good that producers are willing and able to sell at different prices.
Law of Supply
- Direct relationship between price and quantity supplied.
Factors Influencing Supply
- Cost of Production
- Technology
- Government Policies (Taxes, Subsidies)
- Number of Sellers
- Expectations of Future Prices
Shifts in Supply Curve
- Increase in Supply: Curve shifts right.
- Decrease in Supply: Curve shifts left.
Movement Along the Curve
- Caused by a change in the price of the good itself.
Equilibrium
Definition
- Point where the demand curve and supply curve intersect.
Characteristics
- Equilibrium Price: Price at which quantity demanded equals quantity supplied.
- Equilibrium Quantity: Quantity at equilibrium price.