• 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
• How much of a good or service a producer
is willing and able to produce at different
• Supply is produced by the businesses in
hopes of making money.
• 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.
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
• The graph can help predict the performance of the
product over time.
When Supply and Demand Meet
• The point at which the supply and demand curve
meet is known as the equilibrium price and
• When the price is above the equilibrium price,
fewer people are willing to buy—the price is too
• 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.
Prices tell businesses what to produce
• The prices of goods and services dictate what
products are developed, made, improved or
• 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
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.
o They make a new product & competition follows when
others enter the marketplace.