Economics
Supply and demand — quick study summary
AP MicroeconomicsA-Level EconomicsIB Economics
Supply and demand is the core model of price formation in a competitive market. Demand slopes downward (lower price → higher quantity demanded); supply slopes upward (higher price → higher quantity supplied). Equilibrium price clears the market — quantity supplied equals quantity demanded.
Key points
- Law of demand: ↓ price → ↑ quantity demanded (ceteris paribus)
- Law of supply: ↑ price → ↑ quantity supplied (ceteris paribus)
- Equilibrium = intersection of supply and demand curves
- Shifters of demand: income, prices of related goods, tastes, expectations, population
- Shifters of supply: input costs, technology, taxes/subsidies, expectations, number of sellers
Practice quiz
Click each question to reveal the answer.
1. If a normal good's price rises, what happens to quantity demanded?
- Increases
- Decreases
- Stays the same
- Becomes zero
Answer: Decreases
2. What does an increase in input costs do to the supply curve?
Answer: Shifts left (decreases supply)
3. At equilibrium, what is true about quantity supplied and quantity demanded?
Answer: They are equal
Last reviewed: May 2026