SUPPLY AND DEMAND

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SUPPLY AND DEMAND

  1. 1. SUPPLY AND DEMAND understand economics
  2. 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
  3. 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. 4.   Demand Defined • An individual’s 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. 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 product’s demand or supply. • The graph can help predict the performance of the product over time.
  6. 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 buy—the price is too high. • When the price is below equilibrium price, many people are willing to buy a lot of the product—the price is too low. Suppliers may not be able to make enough money to cover costs.
  7. 7. 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.
  8. 8. 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 o They compete with other businesses already meeting the need or want. OR o They make a new product & competition follows when others enter the marketplace.

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