The Basics of Supply and Demand Law of Supply: Quantity supplied rises with a rise in price and falls with a fall in price,

other things remaining the same Law of Demand: Quantity demanded rises with a fall in price and falls with a rise in

price, other things remaining the same. Price Mechanism: Supply and Demand will come into equilibrium to determine both the

market price of a good and the total quantity produced. Regulated Price: Price fixed by the government. The Supply Curve: It shows the quantity of a good that producers are willing to sell at a

given price, citerus paribus; it reflects a relationship between the quantity supplied and the price.

Shift of a Supply Curve: Shifting of the Supply Curve is caused by changes in the other variables affecting supply (production costs, technology, price of related good, business taxes, and others.

The Demand Curve: It shows the quantity of a good that consumers are willing to buy at a given price, citerus paribus; it reflects a relationship between the quantity demanded and the price.

Shift of a Demand Curve: Shifting of a Demand Curve is caused by changes in the other variables affecting demand (income, taste and preferences, prices of related goods, Veblen effect, bandwagon effect, snob effect, and network externality)

The Market Mechanism: Interaction of Supply and Demand Curves; Application of Supply – Demand Model.

Changes in Market Equilibrium: When the Supply Curve shifts to the right, the market clears at a lower price with a larger quantity; When the Demand Curve shifts to the right, the market clears at a higher price with a larger quantity; Price and quantity will change depending on how the supply and demand curves shift and on the shapes of those curves.