Supply and demand model

(noun)

An economic model of price determination in a market.

Related Terms

Examples of Supply and demand model in the following topics:

  • Impacts of Supply and Demand on Pricing

    • The supply and demand model states that the price of a good will be the level where the quantity demanded equals the quantity supplied.
    • As a result of the fall in demand, price drops as well (while the actual quantities of demand and supply will depend on the shape of the demand and supply curves, for the sake of example, let's say the price drops to $4).
    • Supply and demand is an economic model of price determination in a market.
    • If demand decreases and supply remains unchanged, then it leads to lower equilibrium price and lower quantity.
    • If supply increases and demand remains unchanged, then it leads to lower equilibrium price and higher quantity.

  • Macroeconomic Equilibrium

    • In economics, equilibrium is a state where economic forces (supply and demand) are balanced.
    • Determining the supply and demand for a good or services provides a model of price determination in a market.
    • There are four basic laws of supply and demand.
    • The laws impact both supply and demand in the long-run.
    • It is represented on the AS-AD model where the demand and supply curves intersect.

  • Reasons for and Consequences of Shift in Aggregate Demand

    • In economics, aggregate demand is the total demand for final goods and services at a given time and price level.
    • The aggregate supply-aggregate demand model uses the theory of supply and demand in order to find a macroeconomic equilibrium.
    • Likewise, if the monetary supply decreases, the demand curve will shift to the left.
    • The Aggregate Supply-Aggregate Demand Model shows how equilibrium is determined by supply and demand.
    • The model is also used to show real and potential output.

  • Graphing Equilibrium

    • The aggregate supply and aggregate demand determine the output and price for goods and services.
    • In an effort to adjust and reach equilibrium, the economy constantly shifts between excess supply and excess demand.
    • This graph shows the AD-AS model where P is the average price level and Y* is the aggregate quantity demanded.
    • The model is used to show how increases in aggregate demand leads to increases in prices (inflation) and in output.
    • Demonstrate how aggregate demand and aggregate supply determine output and price level by using the AD-AS model

  • The Influence of Supply and Demand on Price

    • Supply and demand is an economic model of price determination in a market.
    • If demand decreases and supply remains unchanged, then it leads to lower equilibrium price and lower quantity.
    • If demand remains unchanged and supply increases, then it leads to lower equilibrium price and higher quantity.
    • If demand remains unchanged and supply decreases, then it leads to higher equilibrium price and lower quantity.
    • Apply the basic laws of supply and demand to different economic  scenarios

  • Explaining Fluctuations in Output

    • The level of output is determined by both the aggregate supply and aggregate demand within an economy.
    • In a standard AS-AD model, the output (Y) is the x-axis and price (P) is the y-axis.
    • Aggregate supply and aggregate demand are graphed together to determine equilibrium.
    • Supply and demand may fluctuate for a number of reasons, and this in turn may affect the level of output.
    • This AS-AD model shows how the aggregate supply and aggregate demand are graphed to show economic output.

  • Impacts of Surpluses and Shortages on Market Equilibrium

    • The existence of surpluses or shortages in supply will result in disequilibrium, or a lack of balance between supply and demand levels.
    • In the analysis of market equilibrium, specifically for pricing and volume determinations, a thorough understanding of the supply and demand inputs is critical to economics.
    • Shifts such as these in the supply availability results in disequilibrium, or essentially a lack of balance between current supply and demand levels.
    • This allows the economic model of the market to correct itself.
    • Infer the outcomes of departures from equilibrium using the model of supply and demand

  • Impacts of Supply and Demand on Businesses

    • The mechanisms of supply and demand in a competitive market determine the price and quantities of products.
    • The supply and demand curves intersect at the price of $0.60 and quantity of 2,000 pounds.
    • The model is commonly applied to wages, in the market for labor.
    • Supply and Demand: P - price Q - quantity of good S - supply D - demand
    • Outline the economic effect of the laws of supply and demand

  • The Function and Nature of Markets

    • In a free market, the price and quantity of an item are determined by the supply and demand for that item.
    • In a free market, the price and quantity of an item is determined by the supply and demand for that item.
    • In order to reach equilibrium, the price must drop, causing demand to rise and supply to fall until the two are equal.
    • Changes to the market supply and market demand will cause changes in the equilibrium price and quantity of the good produced.
    • The market equilibrium exists where the market demand curve and the market supply curve intersect.

  • Shifts in investment due to shocks

    • Positive and negative demand shocks directly impact investment; increases in demand encourage higher investment while less demand lowers investment.
    • Demand shocks may originate from tax rates, money supply, and government spending.
    • Investment is usually modeled as a function of income and interest rates.
    • Increased spending leads to higher prices and therefore higher quantity supplied, inducing firms to invest in further productive capacity such as machinery or land.
    • A negative demand shock decreases the demand for a good and causes the curve to shift to the left.