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Putting Demand and Supply to Work

24 April, 2015 - 11:52

Learning Objectives

  • Learn how to apply the model of demand and supply to explaining the behavior of equilibrium prices and quantities in a variety of markets.
  • Explain how technological change can be represented using the model of demand and supply.
  • Explain how the model of demand and supply can be used to explain changes in 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.