Demand is the amount of a product that consumers are willing and able to buy at different prices. Think of it like a pizza shop: the more slices you offer at a lower price, the more people will order.
📈 Demand Curve: As price decreases, quantity demanded increases (and vice versa).
Supply is the amount of a product that producers are willing and able to sell at different prices. Imagine the pizza shop again: if the cost of dough rises, the shop might produce fewer pizzas even if the price stays the same.
📉 Supply Curve: As price increases, quantity supplied increases (and vice versa).
When demand and supply curves intersect, we find the equilibrium price and equilibrium quantity.
| Price (P) | Quantity Demanded (Qd) | Quantity Supplied (Qs) |
|---|---|---|
| $10 | 80 | 20 |
| $8 | 100 | 40 |
| $6 | 120 | 60 |
| $4 | 140 | 80 |
In the table above, the equilibrium occurs where Qd = Qs (e.g., at $6, Qd = Qs = 60).
Demand: \$Q_d = a - bP\$ (where a, b > 0)
Supply: \$Q_s = c + dP\$ (where c, d > 0)
Equilibrium: set \$Qd = Qs\$ and solve for P* and Q*.
Remember:
💡 Tip: Practice with quick scenarios: e.g., “If the price of coffee rises, what happens to the demand for tea?”