economics. The discussion here begins by examining how demand and supply determine the price and the

quantity sold in markets for goods and services, and how changes in demand and supply lead to changes in

prices and quantities.

3.1 Demand, Supply, and Equilibrium in Markets for Goods and Services

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Explain demand, quantity demanded, and the law of demand

• Explain supply, quantity supplied, and the law of supply

•

Identify a demand curve and a supply curve

• Explain equilibrium, equilibrium price, and equilibrium quantity

First let’s first focus on what economists mean by demand, what they mean by supply, and then how demand

and supply interact in a market.

Demand for Goods and Services

Economists use the term demand to refer to the amount of some good or service consumers are willing and

able to purchase at each price. Demand is fundamentally based on needs and wants—if you have no need or
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