Economics: Demand and Supply Concepts

Demand

• Demand refers to the quantity of a product that consumers are willing and able to buy at various prices.
• QD (quantity demanded) decreases as prices increase, and increases as prices decrease, assuming other factors remain constant.
• The Law of Demand states that as price increases, quantity demanded decreases; and as price decreases, quantity demanded increases.
• Factors affecting demand include income, population, tastes, prices of related goods, and expectations.
• An increase in demand shifts the demand curve to the right, while a decrease shifts it to the left.

Supply

• Supply refers to the amount of a product that producers are willing and able to sell at various prices.
• Supply increases as prices increase, and decreases as prices decrease, assuming other factors remain constant.
• Factors affecting supply include input costs, technology, government regulations, and expectations.
• An increase in supply shifts the supply curve to the right, while a decrease shifts it to the left.

Market Equilibrium

• Market equilibrium occurs when the quantity demanded equals the quantity supplied.
• This point represents a balance between consumers' desires and producers' offerings.
• Disequilibrium happens when QD ≠ QS, resulting in either shortages or surpluses.

Types of Market Structures

• Perfect Competition - large number of buyers and sellers, homogeneous products, easy entry/exit, no individual control over price.
• Monopoly - single seller of a unique product, no close substitutes, significant barriers to entry, significant control over price.
• Oligopoly - small number of sellers, similar or differentiated products, significant barriers to entry, interdependence among firms.
• Monopolistic Competition - many sellers, differentiated products, relatively easy entry/exit, some control over price (e.g., through branding, marketing).

Government Intervention

• Price controls like "price freezes" are implemented in times of crisis (e.g., natural disasters) to prevent exploitation of consumers by suppliers; preventing excessive price increases.