Chapter+4+(JEM)+-+The+Market+Forces+of+Supply+and+Demand

Market is...
__A place for group of buyers and sellers together for goods and services__

It is simple to observe that //Buyers "demand"// and //Sellers "supply"// goods and services to the market!

Then we should know what __demands__ and __supplies__ are:

Law of Demand would look like this!

You see that when the price goes down, the quantity demanded rises. What is quantity demanded? Oh, It's the **amount of goods and services that the buyers are willing to buy**

Now Law of Supply would look like this!

You see that when the price goes up, the quantity supplied rises. Inverse with the demand. right? What is quantity supplied? Oh, It's the **amount of goods and services that the sellers are willing to make**

Remember that **MOVEMENT ON THE CURVE** for both demand and supple is determined by the **PRICE**

However this demand and supply can always change in our lives For example, demand is affected by... -Normal goods -Inferior goods -Substitutes -complements
 * Income
 * Prices of related goods
 * Tastes
 * Expectations
 * Number of Buyers

Which makes the demand curve to... either shift right or left! right would be more (increase in demand) and left would be less (decrease in demand)

On the other side, Supply is affected by...
 * Input prices
 * Technology
 * Expectations
 * Number of Sellers

Which makes the supply curve to... either shift right or left just like the demand curve

Then How do we know these curves represent the market? and what does this have to do with economics?

It's simple, when they criss-cross each other, it makes the market! At equilibrium point, it is shown that both buyers and sellers are happy since they both agree on the price and quantities at that point.

However, this point can move around if.... like this.

But it is not true that market always agree and comes to an equilibrium point. Sometimes the price is too high, so buyers don't want it, but the suppliers want to sell more Vice versa, when the price is too low, buyers want to buy more, but the suppliers don't want to sell.

Which would end up as a **Surplus** and **Shortage**

However, long time ago, a man named John Adams said that the "invisible hand" in the market will somehow bring the market to equilibrium price What he was saying was that "the price" of goods and services will bring changes in the market!

Questions Q1. What is the difference between demand and quantity demanded? Q2. What is the difference between supply and quantity supplied? Q3. What determines the quantity demanded? Q4.What is the factors that make the demand curve to change? Q5. What determines the quantity supplied? Q6. What are the factors that make the supply curve to change?

Answers 1)  Quantity demanded is the amount of good that buyers are willing to pay at certain price, in other words a specific point on the graph. Demand is the whole curve of the graph.   2)   Quantity supplied is the amount that sellers are willing to sell at certain price, in other words a specific point on the graph. Supply is the whole curve of the graph. 3)  Price determines quantity demanded.   4)   Income, Price of related goods, Tastes, Expectations, Number of buyers. 5)  Price determines quantity supplied.   6)   Input prices, Technology, Expectations, Number of sellers.