Macroeconomics

‭H. Demand, Supply, and Market Equilibrium‬ ‭Now‬ ‭that‬ ‭the‬ ‭discipline,‬ ‭methodology,‬ ‭and‬ ‭subject‬ ‭matter‬ ‭of‬ ‭economics‬ ‭were‬ ‭introduced,‬‭it‬‭is‬‭time‬‭to‬ ‭explore‬‭the‬‭basic‬‭forces‬‭at‬‭work‬‭in‬‭market‬‭systems:‬‭demand‬‭and‬‭supply.‬‭These‬‭are‬‭concepts‬‭needed‬‭to‬ ‭understand both macroeconomics and microeconomics.‬ ‭Demand‬ ‭Demand‬ ‭refers to the quantity of a product that buyers‬‭are‬ ‭willing‬ ‭and‬ ‭able‬ ‭to buy at different prices per‬ ‭period of time,‬ ‭ceteris paribus (or other things equal)‬ ‭.‬‭Demand is only effective when backed by‬ ‭purchasing power. For example, if one is willing to buy a car but does not have the money to do so,‬ ‭demand is not effective. It is called notional demand in this case. However, if one is willing to buy a car‬ ‭and has the money to satisfy this want, then demand is effective.‬ ‭Graphical Representation of Demand‬ ‭The‬ ‭demand‬‭schedule‬ ‭is‬‭a‬‭table‬‭used‬‭to‬‭show‬‭how‬‭much‬‭consumers‬‭buy‬‭of‬‭a‬‭particular‬‭good‬‭or‬‭service‬ ‭at different prices. Data in this schedule is used to draw the‬ ‭demand curve‬ ‭.‬ ‭The‬ ‭following‬ ‭demand‬ ‭schedule‬ ‭represents‬ ‭the‬ ‭quantity‬ ‭of‬ ‭tablets‬ ‭consumers‬ ‭are‬ ‭willing‬ ‭and‬ ‭able‬ ‭to‬ ‭purchase‬‭at‬‭different‬‭price‬‭levels.‬‭The‬‭demand‬‭curve‬‭can‬‭now‬‭be‬‭plotted‬‭on‬‭a‬‭graph‬‭to‬‭illustrate‬‭how‬‭the‬ ‭quantity‬ ‭demanded‬ ‭of‬ ‭tablets‬ ‭changes‬ ‭with‬ ‭price.‬ ‭The‬ ‭y-axis‬ ‭(vertical)‬ ‭is‬‭typically‬‭used‬‭to‬‭plot‬ ‭price‬ ‭,‬ ‭whereas the‬ ‭x-axis‬ ‭(horizontal) is used to plot‬ ‭quantity‬‭demanded‬ ‭.‬ ‭Demand schedule:‬

‭Price of a Tablet ($)‬

‭Quantity of Tablets Demanded‬

‭80‬

‭700‬

‭100‬

‭600‬

‭120‬

‭500‬

‭140‬

‭400‬

‭160‬

‭300‬

‭180‬

‭200‬

‭200‬

‭100‬

‭25‬

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