The Laws of Supply and Demand

Market Equilibrium

The price of a good is determined where the Supply Curve meets the Demand Curve.

Definitions:

• Law of Demand: As price goes up, quantity demanded goes down (Inverse relationship).
• Law of Supply: As price goes up, quantity supplied goes up (Direct relationship).

Exam Question: What happens to the equilibrium price if consumer income rises? (Hint: Demand curve shifts right, Price increases).