Where Demand Meets Supply

Move the sliders and touch why a liter of gasoline costs what it costs.

When the price rises, people want to buy less and sellers want to sell more. The point where the two amounts match is the equilibrium. There, nobody has a reason to change the price. The two amount formulas sit side by side below.

For example, when a 🍬 candy costs 300 won, all 30 🧑 classmates fight to buy one. At 1,000 won, nobody buys any. The 🏪 shop owner puts out more candy the higher the price goes. The market stops at the price where the two amounts match.

Part of these learning paths

• Intro Track: First Steps in Microeconomics

Examples & Exercises

Gasoline demand is $Q_d = 10 - P$ and supply is $Q_s = P$.

Where does the market price settle?

Show proof

1. If the price is too low, buyers want more than sellers offer; if too high, the reverse. The price stops only where the two match.

2. Solving $10 - P = P$ gives $P = 5$ and $Q = 5$. In the picture, that is exactly where the two lines cross.

Incomes rise and demand shifts right by $4$ ($Q_d = 14 - P$).

What happens to price and quantity?

Show proof

1. The new equilibrium is $14 - P = P$, so $P = 7$ and $Q = 7$.

2. Higher income makes people want more, and since supply cannot stretch instantly, the price rises too. Price $5 \to 7$, quantity $5 \to 7$ — both move up, visible right in the picture.

1. Intro to Microeconomics