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==Supply and Demand==

==Supply and Demand==

The '''''supply''''' of a good is how much of it, and at what price, is provided by a seller of the good.  Grocery stores, factories, malls, amazon.com, and candy stores all '''''supply''''' goods.  Services, like entertainment, are supplied by Hollywood, Major League Baseball, the NFL and also doctors, lawyers, accountants, and so on.  The supply side is made up of the producers, providers and sellers of goods and services.

The '''''supply''''' of a good is how much of it (the quantity), and at what price, is provided by a seller of the good.  Grocery stores, factories, malls, amazon.com, and candy stores all '''''supply''''' goods.  Services, like entertainment, are supplied by Hollywood, Major League Baseball, the NFL and also doctors, lawyers, accountants, and so on.  The supply side is made up of the producers, providers and sellers of goods and services.

The '''''demand''''' for a good is how much of it, and at what price, is wanted by the public seeking to buy it.  Shoppers, moviegoers, baseball and football fans, and people needing medical care are on the demand side.

The '''''demand''''' for a good is how much of it, and at what price, is wanted by the public seeking to buy it.  Shoppers, moviegoers, baseball and football fans, and people needing medical care are on the demand side.  Often buyers of goods and services are called "consumers".

For any given good or service, there is a supply and demand.  The supply can be described in terms of different quantities at different prices.  The demand can separately be described as different quantities at different prices.  The price has enormous influence over the quantity on both the supply and demand side.

For any given good or service, there is a supply and demand.  The supply can be described in terms of the possible availability of different quantities at different prices.  The demand can be described separately as the willingness of the public to purchase different quantities at different prices.  The price is the key to both the supply and demand side; it is the price that determines the quantity transacted.

No company can afford to build cars (supply them) if the sales price is only $1.  But at a sales price of $30,000, a vast number of cars can be built.  The cause is price, and the effect is quantity.

No company can afford to build cars (supply them) if the sales price is only $1.  But at a sales price of $30,000, a vast number of cars can be built.  '''''The cause is price, and the effect is quantity.'''''

The demand for a good is also described in terms of price and quantity.  At a given price, there is an amount of demand by the public for the good.  A billion people might buy a car if the price were only $1.  At a much higher price of $30,000, the demand drops to a quantity in the millions range.  At a still higher price of $100,000, the demand falls much further to the thousands range.

The demand for a good is also described in terms of price and quantity.  At a given price, there is an amount of demand by the public for the good.  A billion people might buy a car if the price were only $1.  At a much higher price of $30,000, the demand drops to a quantity of only millions sold.  At a still higher price of $100,000, the demand falls much further to the range of only a few thousand that can be sold.

Because supply and demand can both be expressed in terms of price and quantity, they can be plotted on the same graph.  In a confusing convention, the y-axis is typically price, and the x-axis is usually quantity.  (In most other graphs the cause is placed on the x-axis and the effect is on the y-axis, but you will find that economists often seem to have things backwards!)  Just memorize this rule and stick with it:  price is on the y-axis, and quantity is on the x-axis.  This might help you remember:  "p" for price is lower in the alphabet than "q" for quantity, and "p" appears first on the graph as one reads from left to right.

Because supply and demand can both be expressed in terms of price and quantity, they can be plotted on the same graph.  In a confusing tradition by economists, '''''the y-axis is typically price, and the x-axis is usually quantity'''''.  (In most other graphs the cause is placed on the x-axis and the effect is on the y-axis, but you will find that economists often seem to have things backwards!)  Just memorize this rule and stick with it:  price is on the y-axis, and quantity is on the x-axis.  This might help you remember:  "p" for price is lower in the alphabet than "q" for quantity, and "p" appears first on the graph as one reads from left to right.  Put another way, the graph is of "Ps and Qs," in that order from left to right (P on the y-axis to the left, and Q on the x-axis to the right).

The supply curve is '''''upward sloping''''': '''the higher the sales price, the higher the quantity that companies will produce for sale'''.  That is because higher sales prices bring in greater revenue -- and greater profits -- to fund the costs of making the good or providing service.

The supply curve is '''''upward sloping''''': '''the higher the sales price, the higher the quantity that companies will produce for sale'''.  That is because higher sales prices bring in greater revenue -- and greater profits -- to fund the costs of making the good or providing service.