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Learning Objectives

After completing this lesson, you will be able to

  • explain that the interaction of supply and demand determines price
  • define market equilibrium
  • compare a market in equilibrium with a market in disequilibrium
  • describe what happens to price when there is a surplus or shortage in the market
  • demonstrate how changes in the determinants of supply and demand affect the equilibrium price and quantity of a good or service
  • explain that a market reacts to changes in supply and demand by moving to a new equilibrium
  • use graphs to illustrate shifts in supply and demand and changes in equilibrium price and quantity