Demand curve

A demand curve shows the overall demand for a good or service. You can use a demand curve to see the quantity demanded at each price. Quantity is another word for "amount." The quantity demanded is how much of a good or service people are willing to buy. The quantity demanded is related to the price of the good or service. When one changes, the other usually changes too.

Supply curve

A supply curve shows the overall supply for a good or service. You can use a supply curve to see the quantity supplied at each price. The quantity supplied is how much of a good or service producers will make available to consumers. The quantity supplied is related to a good's price. When one changes, the other usually changes too.

Equilibrium

Equilibrium is the point on the graph where the supply curve and the demand curve meet. In other words, supply and demand are perfectly balanced. The amount of a good or service that producers will make make available to consumers is equal to the amount that consumers are willing to buy. When this happens, the good or service sells at its equilibrium price.

The equilibrium price is the ideal price for both producers and consumers. Producers can sell all their goods or services, but there are enough goods or services for every consumer who will pay that price.

Shortage and Surplus

There is a surplus if there is too much for sale at a given price.

There is a shortage if there is not enough for sale at a given price.

Surpluses and shortages usually happen when people who are selling goods or services charge too much or too little.

• • When the price is too high, consumers will not want to buy much of the good or service. The quantity demanded will be less than the quantity supplied. So, there will be a surplus.

  • When the price is too low, too many consumers will want to buy the good or service. The quantity demanded will be more than the quantity supplied. So, there will be a shortage.