Chapter 1
Accounting and Financing
Course: Business Education Content Knowledge 5101
Subject: Business Education Content Knowledge5101
Chapter: Economics
1. Understanding Supply and Demand and the Functioning of the U.S. Macroeconomy
Basic Concepts of Supply and Demand
Supply refers to the quantity of a good or service that producers are willing and able to offer for sale at different prices during a certain period. Demand is the quantity of a good or service that consumers are willing and able to buy at various prices. The interaction between supply and demand determines the market price and quantity of goods sold.
The law of demand states that, all else equal, as the price of a good increases, the quantity demanded decreases. The law of supply states that as the price of a good increases, the quantity supplied increases. The point where the supply and demand curves intersect is called the equilibrium point. This determines the optimal price and quantity in a free market.