The market forces of supply and demand

Chapter 4 (Level of difficulty 2)

Chapter four is based on the market and how supply and demand contribute to the relationship between the quantity demanded and the quantity supplied. If the price of a good increases then the demand for that certain good decrease, and vise-versa. This allows the demand curve and the demand schedule to move along with a constant relationship. There are two types of goods, a normal good and an inferior good. If there is an increase in income then there is an increase in demand that’s considered a normal good. If there is an increase in income, but a decrease in demand that’s considered to be an inferior good. Prices of related goods are placed into two groups, substitutes occur when the price of a good rises thus the demand for the other rises, complements happen when there is an increase in the price of one good, but a decrease in the demand for the other. Supply involves itself with the quantity supplied, which is what a seller is willing or able to sell. If the quantity of a good rises then the price of that good rises as well. Supply schedule and supply curve determine the relationship that the law of supply creates. There is always a difference in individual supply and demand compared to market supply and demand. Not only are there more individuals involved, there are more factors that determine different outputs. Equilibrium is the MOST important thing in supply and demand markets, since eventually the prices and the quantities will come to a point intersection known to be balanced. Excess supply happens when there is more supply than demand. Excess demand is when there is more demand, and less supply. The chapter was overall very easy to understand, various examples were illustrated to show shifts in the graphs and the collected data.