Demand, supply and changes in equilibrium

Demand combines willingness and ability to buy at stated prices over a stated period. Wanting a good without the ability to purchase it is not the same as effective demand. Supply describes the quantities sellers are willing and able to offer under stated conditions.

With other factors unchanged, a price change for the same good causes a movement along its demand curve. A change in income, tastes, related-good prices or another relevant non-price factor can shift the curve. Identify what changed before naming the effect.

Worked example: when the price of a notebook rises, buyers purchase fewer notebooks while the other stated conditions stay fixed. This is a decrease in quantity demanded, not automatically a decrease in demand. If a new study habit increases willingness to buy notebooks at every price, the demand curve can shift instead.

At an equilibrium price, quantity demanded equals quantity supplied. If buyers seek 100 units but sellers offer 70 at the stated price, there is a shortage of 30 units. If sellers offer 100 while buyers seek 70, there is a surplus of 30 units.

Draw price on the vertical axis and quantity on the horizontal axis for a standard demand-supply diagram. Label curves and any movement or shift clearly. State the assumption that other relevant conditions remain unchanged when using a simple model.

Practice:
1. Demand is 60 units and supply is 45 at a price. Find the shortage.
2. Supply is 90 and demand is 65. Find the surplus.
3. Does a consumer-income change represent only a change in the good’s own price?
4. What equality defines market equilibrium in this model?

Answers: 1 15 units; 2 25 units; 3 no, it is a non-price determinant; 4 quantity demanded equals quantity supplied.

Do not use demand and quantity demanded as identical expressions. In an explanation, name the changing variable, the curve affected and the direction supported by the question’s assumptions.