Demand and Supply Definition, Working, Examples, and Graphs.
                     Demand and Supply:
 Definition, Working, 
Examples, and Graphs
What is the Law of 
Supply and Demand?
The law of supply and demand is a theory 
that explains the interaction between the 
sellers of a resource and the buyers for that 
resource. 
The theory defines the relationship between 
the price of a given good or product and the 
willingness of people to either buy or sell it.
Source: www.investopedia.com
The Law of 
Demand
In microeconomics, the law of 
demand is a fundamental 
principle which states that there 
is an inverse relationship between 
price and quantity demanded.
Source: Wikipedia
Examples of the 
Law of Demand
A new restaurant opens up in 
town and gets great reviews. 
There are only 12 tables in the 
restaurant but everyone wants to 
get a reservation. Demand for the 
reservations goes up.
Source: examples.yourdictionary.com
The Law of Supply
The law of supply is a fundamental 
principle of economic theory which 
states that, keeping other factors 
constant, an increase in price 
results in an increase in quantity 
supplied.
Source: Wikipedia
Examples of the 
Law of Supply
A huge wave of new, unskilled 
workers come to a city and all of 
the workers are willing to take jobs 
at low wages. Because there are 
more workers than there are 
available jobs, the excess supply of 
workers drives wages downward.
Source: examples.yourdictionary.com
Factors Affecting 
Supply
Supply is largely a function of 
production costs such as labor and 
materials; the physical technology 
available to combine inputs; the number 
of sellers and their total productive 
capacity over the given time frame; and 
taxes, regulations, or other institutional 
costs of production.
Source: www.investopedia.com
Factors Affecting 
Demand
Consumer preferences among 
different goods are the most important 
determinant of demand. 
The existence and prices of other 
consumer goods that are substitutes 
or complementary products can 
modify demand. 
Source: www.investopedia.com
Why is the Law of 
Supply and Demand 
important?
The Law of Supply and Demand is important 
because it helps investors, entrepreneurs, 
and economists to understand and predict 
conditions in the market. 
At the same time, they might try to further 
increase their price by deliberately 
restricting the number of units they sell, in 
order to decrease supply.
Source: www.investopedia.com
Using Supply and 
Demand to Set Price 
and Quantity
To determine the price and quantity 
of goods in the market, we need to 
find the price point where 
consumer demand equals the 
amount that suppliers are willing to 
supply. This is called the market 
"equilibrium." 
Source: www.investopedia.com
Changes in Demand 
and Supply
A change in price usually leads to 
a change in the quantity 
demanded or supplied.
 If there's a long-term increase in 
the price of gas, the pattern of 
demand changes. 
Source: www.investopedia.com