Supply and demand
Mind your Ps (price) of a good or service and Qs (quantity) sold
Linear supply and demand graph
The demand and supply curves below illustrate the effects price and quantity have on both supply and demand.
Demand curve y-intercept: highest price consumers are willing to pay
Supply curve y-intercept: lowest price producers are willing to accept
Assumptions
There are four key assumptions:
| Assumption | |
|---|---|
| 1 | We focus on supply and demand in a single market |
| 2 | All goods sold in the market are identical (commodities) |
| 3 | All goods sold in the market sell for the same price, and everyone has the same information |
| 4 | There are many producers and consumers in the market |