Session Summary - Demand and Supply

This session covered the central themes of demand and supply.

1. You learnt about the law of demand
   • The demand for a product increases if its price is reduced, and vice versa
   • The demand curve shows the quantity of a product demanded by consumers in response to the price of the product
   • Several factors affect the demand curve. These are called determinants of demand.

   • Some products go against the law of demand. The demand for Veblen goods rises as their price increases. The demand for Giffen goods decreases as their price decreases.

2. You learnt about the law of supply
   • The supply for a product increases if its price is increased, and vice versa
   • The supply curve shows the quantity of a product supplied by firms vs. the price of the product

   • Several factors affect the supply curve. These are called determinants of supply

3. You learnt about the price elasticity of supply and demand

   • Price elasticity of demand: Calculated as the percentage change in the quantity demanded divided by the percentage change in price.

   • Price elasticity of supply: Calculated as the percentage change in the quantity supplied divided by the percentage change in price.

   • You also learnt about the different degrees of elasticity

4. Finally, you learnt about market equilibrium

   • Market equilibrium is the price point where quantity demanded is equal to the quantity supplied