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Shows inverse correlation between the quantity of a good demanded at every price point.

Law of Demand- Inverse relationship between quantity demanded and price, resulting in a negative curve.

Increase/decrease in demand is represented by right/left shifting of entire graph.
Factors:
T- Tastes and preferences
R- Related goods and services
I- Income
B- Buyers
E- Expectations

Increase/decrease of QUANTITY of demand is a movement on the curve.
Factors:
Price

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Shows direct correlation between price and quantity supplied of a good.

Law of Supply- direct relationship between quantity supplied and price, resulting in a positive curve.

Increase/decrease in supply is represented by right/left shifting of entire graph.
Factors:
R- Resources
O: Other goods and services
T- Technology
T: Taxes and subsidies
E- Expectations
N: Number of producers

Increase/decrease of QUANTITY of supply is a movement on the curve.
Factors:
Price

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Equilibrium in the Combined Supply and Demand Curve

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Equilibrium in the Combined Supply and Demand Curve

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Equilibrium: quantity of demand = quantity of supply, occurs at equilibrium price

When price is above equilibrium or market-clearing price, there is a surplus.

When price is below equilibrium or market-clearing price, there is a shortage.

Same rules of shifting, ROTTEN for supply and TRIBE for demand apply to this as well.

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PRICE CEILING:
Is a limit (a ceiling) to the max price a seller can charge.
Works only below the equilibrium point.

Causes Shortages

Inefficiencies:
waste of resources
black market
allocation

PRICE FLOOR:
Is a limit (a floor) to the minimum price buyers are required to pay.
Works only above the equilibrium point.

Causes Surpluses

Inefficiencies:
low quantity
illegal activity
allocation
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Quantity Control (quotas):
limits quantity of something that can be bought/sold

License: gives specific amount of people right to supply good, therefore limiting quantity

Quota creates a "wedge" on demand and supply curve, which leads to dead weight loss, where inefficiency of transactions occurs.