Chapter 2
Supply and Demand: You Have What Consumers Want
In This Chapter
Buying more with lower prices
Producing more with higher prices
Compromising on price at equilibrium
Moving toward equilibrium when shortages and surpluses occur
Understanding why equilibrium changes
The Scottish essayist Thomas Carlyle said, “Teach a parrot the terms ‘supply and demand’ and you’ve got an economist.” Or there’s a story about a student standing next to an economist by a bank of elevators. Three elevators passed them on the way to the basement. The student said, “I wonder why everybody in the basement wants to go upstairs.” The economist responded, “You’re confusing supply with demand.” Or finally, there is an old joke, “Talk is cheap. Supply exceeds demand.”
The numerous jokes about supply and demand indicate its fundamental importance in economics. Indeed, if the parrot understood what the terms supply and demand meant, it wouldn’t be much of an exaggeration to say the parrot qualifies as an ...
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