Changes

*A fall in price tends to increase demand, and a rise in price tends to decrease demand. '''LOWER PRICE MEANS HIGHER DEMAND''' (and higher price means lower demand).  This is known as the '''Law of Demand''': demand changes inversely with price.

*A fall in price tends to increase demand, and a rise in price tends to decrease demand. '''LOWER PRICE MEANS HIGHER DEMAND''' (and higher price means lower demand).  This is known as the '''Law of Demand''': demand changes inversely with price.

*When demand exceeds supply at a given price, the price tends to rise. Likewise, when supply exceeds demand, the price tends to decrease.     

*When demand exceeds supply at a given price, the price tends to rise as sellers take advantage of the high demand by increasing price. Similarly, when supply exceeds demand, the price tends to decrease as sellers try to sell their unsold goods.     

*Price tends to move towards the amount at which the quantity in demand is equal to the quantity in supply: '''EQUILIBRIUM IS WHERE SUPPLY EQUALS DEMAND'''.

*Price tends to move towards the amount at which the quantity in demand is equal to the quantity in supply: '''EQUILIBRIUM IS WHERE SUPPLY EQUALS DEMAND'''.

Many of the problems in this course, and in any economics course, can be answered just by remembering and applying the above there principles about price.  The equilibrium price is the result of a "tug of war" between the buyer and seller:  the buyer wants to pay less (a lower price), and the seller wants to receive more (a higher price).  Those opposing forces are constantly working to keep the price at equilibrium.

Many of the problems in this course, and in any economics course, can be answered just by remembering and applying the above three principles about price.  The equilibrium price is the result of a "tug of war" between the buyers and sellers:  the buyers (the public) want to pay less (a lower price), and the sellers want to receive more (a higher price).  These opposing forces are constantly working to keep the price at equilibrium.

== The Law of Supply ==

== The Law of Supply ==