ABSTRACT
Basic supply-and-demand (S&D) analysis is one of the fundamental parts of a standard economics course—and often the part of the course that students will remember the longest, and perhaps even find application for in real life. Being able to distinguish factors that primarily influence the demand side of the market from factors that influence the supply side, and being able to think about the likely effects on market prices of shifts in supply and demand, are important skills. The idea that prices tend to rise when demand rises or supply falls, and that prices tend to fall when demand falls or supply rises, is the main lesson to be drawn from supply-and-demand analysis. Many books also go on to discuss the more subtle issue of “elasticities,” or the strength of the response of quantity supplied and demanded to price changes.
