Supply and Demand
High School
Definition
A model explaining how the price and quantity of a good are determined in a market. Demand falls as prices rise while supply rises, and the market tends toward the equilibrium price where the two balance.
Worked examples
When concert ticket prices drop from $100 to $50, more students buy tickets (demand rises) and scalpers sell fewer (supply falls).
Lower prices increase quantity demanded and decrease quantity supplied.
Gas stations charge $3.50 per gallon—the equilibrium price where the amount drivers want to buy equals what refineries supply.
At equilibrium, quantity demanded equals quantity supplied, so the market clears without shortage or surplus.
Common mistakes
- Higher prices cause supply to fall. → Higher prices cause quantity supplied to rise (suppliers produce more). Confusing the supply curve itself with movement along it; supply rises as price rises.
- Demand and quantity demanded mean the same thing. → Demand is the whole relationship; quantity demanded is the amount at one price. Demand is the curve; quantity demanded is a single point on that curve at a given price.
- Equilibrium price never changes once set. → Equilibrium shifts when supply or demand curves move due to outside factors. Changes in income, tastes, costs, or technology shift the curves and create a new equilibrium.
Where you'll use it next
You'll apply supply and demand to explain market outcomes in economics, analyze policy effects like taxes and price controls, and understand real-world issues from labor markets to international trade.
See also
Market StructuresScarcity and ChoiceOpportunity CostMarket FailuresConsumer BehaviorGovernment Roles in the Economy
Reviewed by Pat Cheng, M.Ed. — StudyPug Curriculum Lead · Last updated June 6, 2026