Supply and Demand

An increase in supply will shift the supply curve to the right

It will decrease prices, as there are more goods/services available but the same demand for them

When prices decrease, more consumers are willing to buy the good/service

This means equilibrium has met at a new point, at a lower price and higher quantity

An decrease in supply will shift the supply curve to the left

It will increase prices, as there are less goods/services available but the same demand for them

When prices increase, fewer consumers are willing to buy the good/service

This means equilibrium has met at a new point, at a higher price and lower quantity

An increase in demand will shift the demand curve to the right

It will increase prices, as there are more consumers willing to buy the good/service

When prices increase, more firms are willing to sell their good/service

This means equilibrium has met at a new point, at a higher price and higher quantity

An decrease in demand will shift the demand curve to the left

It will decrease prices, as no one is willing to buy at the original high price

When prices decrease, less firms are willing to sell their good/service

This means equilibrium has met at a new point, at a lower price and lower quantity

Excess supply happens when the price is higher than the equilibrium price (what the price should be so supply and demand match)

An example of this is when a producer overestimates how much consumers are willing to pay for a product, meaning the demand is lower than the supply, and there is a surplus of the product

Excess demand happens when the price is lower than the equilibrium price (what the price should be so supply and demand match)

An example of this is when a producer puts on a flash sale of a product, meaning demand is higher than supply, and there is a shortage of the product