UNDERSTANDING

Economic S y s t e m s

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Supply &

Part 5:

Demand

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The market economy is based on the

principles of supply and demand.

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Demand The quantity of goods or services that consumers are

willing and able to buy.

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Supply The quantity of goods or services that businesses are

willing and able to provide.

Supply Graph

Quantity

Pri

ce

The Supply

Curve on a

graph is

ascending.

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Law of Supply As the price of a good decreases, the supply of that

good will decrease.

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Demand Graph The Demand

Curve on a

graph is

descending.

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Quantity

Pri

ce

Law of Demand

As the price of a good decreases, the demand of

that good will increase.

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Equilibrium Where the

two curves

meet, is the

equilibrium

point.

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Quantity

Pri

ce

Surplus When there is

more supply,

than quantity

demanded, a

surplus is

created.

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Quantity

Pri

ce

Shortage When there is

less supply,

than quantity

demanded, a

shortage is

created.

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Quantity

Pri

ce