Demand and Supply Curves
Overview
This resource is for anyone who wants to learn about the concept of demand and supply curves and their features as well as the concept of market equilibrium. It is designed to introduce the basic knowledge about the concepts, so it is more like an introduction to the field of microeconomics through learning the fundamental theory of demand and supply in the market.
Demand Curve
The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time. It is a downward-sloping curve because as the price of the good increases, people would want less of that good. In contrast, if the price decreases, meaning the good is much cheaper than before, customers will want more of the good so that they can save some money.
Supply Curve
The supply curve is a graphic representation of the correlation between the cost of a good or service and the quantity supplied for a given period. Typically, the supply curve is upward-sloping because as the market price for one good is increasing, the suppliers will be more lucrative to produce more so that they can earn more money. However, if the market price is decreasing due to some reasons, suppliers will want to produce less since the market for that good is not at its best, and producing more will lead to a considerable amount of loss.
The Market Equilibrium Point
By definition, the market equilibrium is where for a particular good, the demand is equal to the supply in the market. When the demand is equal to the supply, then we say we have reached an equilibrium point. Graphically, the market equilibrium is where the demand curve intersects with the supply curve. At this point, the quantities of goods supplied and demanded are the same, and the prices at which the goods are supplied and demanded are also the same. The market equilibrium is important because it represents that the market price is stable and helps the suppliers and the customers to decide their further actions.