Supply & Demand

Supply and Demand

Why are some items that are for sale relatively inexpensive, and others cost so much that you wouldn't ever think about buying them?
Why does your neighborhood have the types of businesses that it has, and not others? Why are the store shelves for some items empty at times, and seemingly overflowing at other times?
Why are some types of businesses forced to compete with many others, while other types of businesses are free to operate with little or no competition?
Why do some businesses thrive while others are shutting down? Why do prices change?

The answers to these and many other common questions are based on supply and demand.

It has been said many times that the study of economics is the same thing as the study of supply & demand. If you understand supply & demand, the saying goes, then you understand economics. Indeed, all topics studied in economics classes are related very closely to supply & demand. And it is true that the study of all other economics topics builds on the concepts of supply & demand.


An understanding of supply & demand is essential to an understanding of everything that is related to the study of economics. If you have difficulty with any topic in economics, it is likely that a more thorough understanding of supply & demand will solve that problem. A lack of a thorough understanding of supply & demand can cause misconceptions later on in your studies.

In short, this section is probably the most important section in the entire study of economics. You will want to understand what is in this section before trying to master the other topics in economics.

You can begin by clicking on one of the following links; or you can go through each link in succession to complete the Economics Online Tutor lesson on supply & demand.

Demand analysis: utility
Demand analysis: indifference curves
Supply & demand equilibrium
Changes in equilibrium
Supply & demand in the factor markets