- Understand the law of demand and how it is visually represented
- Understand the law of supply and how it is visually represented
- Understand surpluses and shortages
- Understand equilibrium price and quantity
- Identify factors that can change supply and demand
Supply and Demand
You can view the transcript for “Supply and Demand: Crash Course Economics #4” here (opens in new window).
Factors That Shift Demand Curves
Six factors that can shift demand curves are summarized below. The direction of the arrows indicates whether the demand curve shifts represent an increase in demand or a decrease in demand. Notice that a change in the price of the good or service itself is not listed among the factors that can shift a demand curve. A change in the price of a good or service causes a movement along a specific demand curve, and it typically leads to some change in the quantity demanded, but it does not shift the demand curve.

Factors That Shift Supply Curves
Changes in the cost of production affect how much firms are willing to supply at any given price. Notice that a change in the price of the product itself is not among the factors that shift the supply curve. Although a change in price of a good or service typically causes a change in quantity supplied or a movement along the supply curve for that specific good or service, it does not cause the supply curve itself to shift.

Because demand and supply curves appear on a two-dimensional diagram with only price and quantity on the axes, you might think that economics is about only four topics: demand, supply, price, and quantity. However, demand and supply are really “umbrella” concepts. Demand covers all the factors that affect demand, and supply covers all the factors that affect supply. Factors other than price that affect demand and supply are included by using shifts in the demand or the supply curve. In this way, the two-dimensional demand and supply model becomes a powerful tool for analyzing a wide range of economic circumstances.