Social Studies - 2019-20

CE.12b - Supply and Demand

The student will apply social science skills to understand the United States economy by

b) describing how in a market economy supply and demand determine prices;


Adopted: 2015

BIG IDEAS

UNDERSTANDING THE STANDARD

Both buyers and sellers respond to price changes. When prices change, buyers change the quantity they are willing and able to buy and sellers change the quantity they are willing and able to bring to market.

Neither supply nor demand alone can set the price.


ESSENTIALS

Price

 Price is determined by the interaction of supply and demand.

 Price is the amount of money exchanged for a good or service.


Demand

 Demand is the amount of a good or service that consumers are willing and able to buy at different prices during a given time period.

 Law of demand: Consumers will buy more of a good or service at lower prices and less at higher prices.

 Higher prices for a good or service provide incentives for buyers to purchase less of that good or service.

 Lower prices for a good or service provide incentives for buyers to purchase more of that good or service.


Supply

 Supply is the amount of a good or service that producers are willing and able to offer for sale at each possible price during a given period of time.

 Law of supply: Producers will produce more when they can sell at a high price and will produce less when they can sell at a low price.

 Higher prices for a good or service provide incentives for producers to make or sell more of a good or service.

 Lower prices for a good or service provide incentives for producers to make or sell less of a good or service.


Equilibrium price

 Equilibrium price is the point where supply and demand meet.

 Everyone who wants to sell at that price can sell.

 Everyone who wants to buy at that price can buy.


KEY VOCABULARY

Updated: May 16, 2018