Question

provide real-world examples to support your explanation, including one personal example from your own experiences.

Answer 1

Supply & demand decisions are made by 2 groups in the economy: Consumers & producers.

The consumers want to purchase multiple goods, and producers make the goods available by supplying them.

For example, we want to purchase milk for consumption and the dairy firms produce & supply milk in the market.

Again, petroleum is an essential good which consumers from different groups want to consume. Oil producing & exporting countries or cartels like OPEC produce & sell petroleum.

Demand refers to the overall demand of a good existing in the market. Quantity demanded is the amount consumers want to buy based on their demand functions, based on different prices.

Similarly, supply refers to the overall quantity available for sale in market. Quantity supplied is the amount producers want to supply at different prices.

Change in demand refers to the change in consumption of a buyer, when any factor other than the good's own price changes. This represents a shift of the demand curve. If demand increases, the demand curve shifts outward & if demand decreases, demand curve shifts leftward.

Change in quantity demanded is a movement along a demand curve corresponding to change in its own price. If price increases (decreases), there is a movement up (down) the demand curve.

Change in supply refers to change in production of a good by its producer, when any factor other than the good's own price changes. This represents a shift of the supply curve. If supply increases, the supply curve shifts outward & if supply decreases, supply curve shifts leftward.

Change in quantity supplied is a movement along a supply curve corresponding to change in its own price. If price increases (decreases), there is a movement down (up) the supply curve.

Note here: demand curve is downward sloping & supply curve is upward sloping.

Examples: If price of burgers increases, consumers want to buy less quantity of burgers & there is an upward movement along demand curve. But at a higher price, burger makers want to sell (and profit) more, so they supply more, there is a rightward movement along supply curve.

But if buyers' income decreases, the demand curve will shift toward left to reflect decreased demand & if cost of burger input (e.g. bread) increases, it raises production cost & suppliers are unwilling to supply more, so supply curve shifts leftward to reflect lower quantity supplied.

Price Change in Demand: Decrease in Income Qty

Price Changein Qty Supplied: Increase in Own Price Qty

Price Change in Supply: Increase in Input cost Qty

Price Changein Qty Demanded: Increase in Own Price -L Oty