Demand and Supply as Curves
A demand schedule and a supply schedule become two curves on the same axes: quantity demanded falls as price rises, quantity supplied rises with it. Reading a quantity off a price, and a price off a quantity, is the basic move the rest of the model is built from.
What a learner can do afterwards
- Plot a demand curve and a supply curve from a table of prices and quantities
- State the law of demand and the law of supply and give a reason for each, not just the direction
- Read both quantities at a stated price and say which one is larger
1 · Read
Scarcity means buyers must choose how to spend limited money. A demand schedule lists quantities buyers are willing and able to buy at each price; a supply schedule lists quantities sellers offer. For example, buyers want 12 apples at 1 coin, 8 at 2 coins and 4 at 3 coins. Plot quantity horizontally and price vertically. Demand usually slopes down; supply usually slopes up, holding other influences fixed.
These bars compare quantities demanded at three prices. A demand curve instead places quantity horizontally and price vertically.
A curve plots each schedule pair with quantity on the horizontal axis and price on the vertical axis. Join the points for each schedule. To find a quantity, start at a price, move horizontally to the curve, then down to the quantity axis. Reverse these moves to find a price from a quantity. At one price, compare the quantities wanted and offered. Each demand point shows planned purchases at that price, not guaranteed sales.
Holding other influences fixed, a higher price usually reduces quantity demanded: some buyers buy less or switch to substitutes. Spending more on this good leaves less for their next best use of the money. A higher price usually increases quantity supplied because it covers more costly production. This is the law of supply. These are movements along fixed curves, not changes in the whole schedules.
Compare both quantities at the same price and for the same period. Demand and supply describe plans; actual trades also need someone on the other side.
With other influences fixed, demand usually slopes down and supply up. Each point pairs a price with a planned quantity.
The rewritten readings were written for this dataset.
More to read
Introduction to Demand and Supply
Demand and supply schedules describe plans for the same good and period. A demand schedule records the quantity buyers are willing and able to buy at each price. A supply schedule records the quantity sellers offer. Place quantity on the horizontal axis and price on the vertical axis, plot each pair, and join the points for each schedule. To read quantity, move across from a price to a curve, then down. Comparing the two quantities at one price reveals which plan is larger. A plan to buy is not a record of completed sales.
Following a price change along a curve
If everything else stays unchanged, higher prices generally lead buyers to demand less. They may reduce purchases or choose substitutes. Sellers usually supply more, since the higher price makes costlier production worthwhile. These changes follow existing curves. Income, preferences and production costs can instead alter the schedules. When studying price alone, treat those other factors as unchanged.
2 · Watch
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Where it sits
Optional connections
This opens up
Where this leads
8 questions wait behind this lesson, each with its answer explained. Every answer feeds the sky: stars light as they are learned, and dim when it is time to come back.