Chapter 4

The relationship between supply and demand is the basis of Chapter 4. In a competitive market, there are so many buyers and sellers that each of them has no impact on the market price. The law of demand shows that as prices of a good falls, the quantity of a good rises. Basically, if the prices for apples falls, people will buy and demand more apples. This is seen as a negative relation, and the demand curve is shown in a downward curve. In contrast, the law of supply states that as the prices of a good rises, the quantity of a good rises. Therefore, when the price of apples rise, then the amount of apples produced rises. This is seen as a positive relation, and the supply curve shifts upward. The intersection of the supply and demand curves is known as equilibrium, which means that there is a balance in the price and quantity of a product. The area above equilibrium on the graph means there is a surplus in items made than are demanded. The area below equilibrium on the graph means there is a shortage, which means that items desired are greater than the number available. I felt this chapter was understandable due to relatable examples that helped explain these concepts. I also felt the labeled graphs were helpful explaining the supply and demand curve relationships. I think the hardest part was learning about the shifts in the supply/demand curves and how the graphs then changed.