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Introduction_to_Microeconomics_Ch4.pdf
4.2 Supply and Demand
The law of supply stating that all else equal, an increase in price results in an increase in quantity supplied. In other words, there is a direct relationship between price and quantity: quantities respond in the same direction as price changes.
Supply is depicted as an upward sloping curve. A change in price results in a movement along the supply curve, whereas a change in any other variable shifts the supply curve.
Key Definition
Equilibrium: The point at which the supply and demand curves intersect.
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Try It: Summarize This Module
"Summarize the key causes of inflation mentioned in this section for my macroeconomics final."
- •Demand-Pull Inflation: Occurs when aggregate demand exceeds aggregate supply. Described as "too much money chasing too few goods".
- •Cost-Push Inflation: Driven by rising costs of production inputs (e.g., oil, labor) which decreases aggregate supply.