Applications of Demand and Supply
4.1 Putting Demand and Supply to Work
- Learn how to apply the model of demand and supply to the behavior of equilibrium prices and output in a variety of markets.
- Learn basic vocabulary on the organization of firms and explain how the model of demand and supply can be used to understand prices of shares of stock.
A shift in either demand or supply, or in both, leads to a change in equilibrium price and equilibrium quantity. We begin this chapter by examining markets in which prices adjust quickly to changes in demand or supply: the market for personal computers, the markets for crude oil and gasoline, and the stock market. These markets are thus direct applications of the model of demand and supply.