In This Chapter
Looking at the supply curve
Demanding to see the market demand curve
Seeing how a market equalizes supply and demand
If anything exemplifies microeconomics, it’s the well-known model of supply and demand in a marketplace. Aspects such as constrained optimization (Chapter 6) or firm production decisions (Chapters 7 and 8) are of course important, but microeconomics really comes into its own with the supply and demand model. In many ways, it’s the most powerful tool in the microeconomist’s toolkit.
The supply and demand model is a centerpiece of economics because it adds to the understanding of the consumer and producer by letting them interact through the medium of exchange. This exchange is voluntary and, as such, benefits both parties, though not necessarily to the same extent. The supply and demand model is also the bedrock of the discussions of different types of markets covered in Chapters 10–12.
So if you — ahem — demand an explanation on supply and demand, and how the market seeks equilibrium between the two, we’re happy to — ahem, ahem! — supply one.