Supply and Demand

This course is a part of AP®︎ Microeconomics, a 11-course Topic series from Khan Academy.

This unit begins the study of product markets: the markets for the goods and services produced. In this unit, you will begins the study of product markets, focusing on the supply and demand model. Students will be introduced to the determinants of demand and supply, market equilibrium, and how changes in equilibrium occur when supply and demand change. Then, build on the supply and demand model to deepen your economics toolkit with the concepts of elasticity, consumer and producer surplus, and the impact of government policies.

This course contains 9 segments:

Demand

Markets are interactions of buyers and sellers. In this lesson, learn about the buyers' side of the market. Topics include the law of demand, determinants of demand, and using graphical models of demand.

Supply

Learn about the other side of markets, supply, in this lesson. Topics include the law of supply, determinants of supply, and using graphical models of supply.

Price elasticity of demand

Elasticities are one of the most useful tools in economics. Learn about price elasticity of demand in this lesson. Topics include calculating and interpreting price elasticity of demand, determinants of price elasticity of demand, and the role price elasticity of demand plays in a firm's revenue.

Price elasticity of supply

Learn about price elasticity of supply in this lesson. Topics include calculating and interpreting price elasticity of supply, as well as determinants of price elasticity of supply.

Other elasticities

In reality, elasticity can be measured for any determinant of demand or supply. Learn about two more important elasticities of demand—income elasticity of demand and cross price elasticity of demand—in this lesson.

Market equilibrium and consumer and producer surplus

Prices and quantities sold in markets are determined by the interaction of buyers and sellers. In this lesson, you will learn about market equilibrium and disequilibrium, as well as a way economists measure the benefits that markets create for buyers and sellers using the concepts of consumer and producer surplus.

Disequilibrium and changes in equilibrium

When factors affecting supply or demand change, the equilibrium price and quantity in a market also change. Topics in this lesson include shortages, surpluses, using a supply-demand model to show how changes in market factors impact equilibrium price and quantity, and how consumer and producer surplus are affected by price changes.

The effects of government interventions in markets

When governments intervene in markets—such as imposing price controls, quantity controls, or taxes— this affects consumer and producer surplus. In this lesson, learn about government interventions alter incentives, how to use a supply-demand model to illustrate these effects, how to calculate the effects of government interventions on consumer and producer surplus, and the role elasticity plays in the effects of government interventions.

International trade and public policy

Equilibria in competitive markets may be altered by the decision to open an economy to trade with other countries. Governments sometimes use tariffs and quotas to influence internatinal trade, which affects the domestic price of a good, government revenue, and total economic surplus.