ABSTRACT
This chapter presents the supply-and-demand model that underlies much of microeconomic analysis. The model is presented using tables and graphs showing the relationship between prices and the quantity demanded or produced. The various factors that increase or decrease supply and demand are detailed. Bringing supply and demand together, you will see how market forces work to eliminate shortages and surpluses, resulting in equilibrium. You will learn to use the supply-and-demand model to understand how markets adjust when supply-and-demand curves change over time. The chapter ends with a discussion of markets in the real world, including whether markets behave as indicated by economic theory and whether market outcomes are necessarily equitable.
