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The fundamental diagram showing the relationship between demand and supply in a competitive market, determining equilibrium price and quantity.
Demand Curve (D): Shows the inverse relationship between price and quantity demanded. Slopes downward from left to right.
Supply Curve (S): Shows the positive relationship between price and quantity supplied. Slopes upward from left to right.
Equilibrium Point (E): The intersection of demand and supply curves where market clears.
The demand curve shows the relationship between price and quantity demanded, sloping downward due to the law of demand.
The supply curve shows the relationship between price and quantity supplied, sloping upward due to the law of supply.
Market equilibrium occurs where demand and supply curves intersect, determining the equilibrium market price and quantity.
Shifts in demand or supply curves lead to changes in equilibrium price and quantity.
Explore other diagrams from the same unit to deepen your understanding
A supply and demand diagram showing the effect of an indirect tax on a good with inelastic demand. The consumer bears a larger share of the tax burden.
A production possibility curve illustrating the concept of opportunity cost and the trade-offs between producing two goods: mangos and bananas.
A PPC diagram showing different levels of production efficiency and economic feasibility using combinations of consumer and capital goods.
A model illustrating how money, goods, services, and resources flow between households, firms, the government, the financial sector, and the foreign sector in an economy.
A refined circular flow model highlighting the roles of injections and withdrawals in determining national income and economic equilibrium.
A diagram illustrating consumer surplus and producer surplus in a competitive market, showing the benefits to buyers and sellers at the market equilibrium.
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