Supply and Demand

There are many causes for changes of supply and demand. Supply and demand is the major backbone to a market economy. The quantity demanded of any good is the amount of the good that buyers are willing and able to purchase. As we will see, many things determine the quantity
demanded of any good, but when analyzing how markets work, one determinant
plays a central role—the price of the good (mankiw, 2007). A shift in a demand or supply curve occurs when a good's quantity demanded or supplied changes even though price remains the same. For instance, if the price for a banana was $1 and the quantity of bananas demanded increased then there would be a shift in the demand for bananas. A shift in the demand relationship would occur if, for instance, bananas suddenly became the only type of fruit available. In other words, a movement occurs when a change in quantity supplied is caused only by a change in price, and vice versa (Investopedia, N.d).
      Another example of change in supply and demand is excess demand.   Excess demand is created when price is set below the equilibrium price. Because the price is so low, the demand is high while the production is low.   Too few goods are being supplied to satisfy the demand for them. While the consumer has to compete to buy at this price the demand will make the price increase bringing it back to its equilibrium. Demand shortfalls are another example of what can change supply and demand.
Changes in price and quantity can influence the market equilibrium.   If a price on a particular product is increased, then the demand for that product will decrease.   If the price is decreased, the product of demand will increase.   The market equilibrium can change based on supply and demand.   When a particular product is on sale, then more people would be willing to buy this product.   If more people buy the product then this could produce a shortage of that product and the market curve would shift to the right.   If the demand for the... [continues]

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