Demand, supply and price
G3 Economics - syllabus K343, 2027
How markets work, what shifts demand and supply, equilibrium, and why prices change.
- What a market is and who takes part
A market is any place or arrangement where buyers and sellers exchange goods or services.
- Demand and the demand curve
Demand is what buyers are willing and able to buy at each price; a lower price raises quantity demanded.
- What shifts demand
Changes other than the good's own price, such as income or the price of related goods, shift the demand curve.
- Supply and the supply curve
Supply is what sellers are willing and able to sell at each price; a higher price raises quantity supplied.
- What shifts supply
Changes in costs, technology, weather, the number of firms, and taxes or subsidies shift the supply curve.
- Equilibrium, shortages and surpluses
At equilibrium, quantity demanded equals quantity supplied; at any other price there is a shortage or a surplus.
- How the price mechanism answers what, how and for whom
Prices signal what people want, reward producers who supply it, and ration goods to those willing and able to pay.
- Causes and consequences of price changes
Shifts in demand or supply change the equilibrium price, which changes how much is bought and sold.
- Put it together: Allocate concert tickets
A popular band announces one concert. 50,000 fans want tickets but the stadium holds 20,000. At the planned price of $150 there is a shortage. Compare ways of deciding who gets in.