A2+-++supply+and+demand

What is the relationship between supply and demand? (graph)

The relationship between supply and demand is the backbone of the market economy.
 * Demand: Demand is illustrated by a curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specific period of time. It determines how much of a product is desired by buyers.
 * Law of Demand: As price falls, the quantity demanded rises. As prices rise the quantity of demand falls and the price drops. In other words the higher the price, the lower the quantity demanded.
 * Supply: Supply is illustrated by a curve showing the various amounts of product that producers are willing to make available for sale at each series of possible prices during a specific period of time. Supply also represents how much a market can offer.
 * Law of Supply: As price rises, the quantity of supply rises. Positive and direct relationships with prices will determine the supply. In other words the higher the price, the higher the quantity supplied.


 * Relationship: In the chart below, it is shown that if the supply and demand are at the equilibrium, there will be enough products for the consumer and at a stable price that keeps the supplier in business. This results in a stable economy. The modern economy strives for an equilibrium If the supply and demand are above the equilibrium, then there will be a surplus, which will mean the supplier suffers put the consumer prospers. If the supply and demand are below the equilibrium, the supplier prospers but the consumers suffer. These two outcomes are the opposites of each other. As demand increases, so does supply (as well as the price).
 * Equilibrium: When the supply and demand are equal the economy is said to be in an equilibrium. When prices are matched and prices are stable.
 * Surplus: This is when the consumer prospers with low prices and an abundance of products and the supplier suffers because of the lack of profit.
 * Shortage: This is when the consumer suffers from high prices and low quantity of products and the supplier prospers because of high profits.

