Market Supply & Demand Schedules Video

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Lesson Transcript
Instructor: Christopher Sailus

Chris has an M.A. in history and taught university and high school history.

In this lesson, we explore the economic market's laws of supply and demand and the schedules that economists create to tabulate the amount of goods demanded or supplied at certain prices across the entire economy.

Supply and Demand Schedules

Humans are pretty good at making lists. Whether it's a grocery shopping list or a list of things you need to do that day, lists can help you organize things and make a record of the myriad things sloshing about in your brain. If you're like me, without a list, you'll probably forget half of the things you have to do! And lists aren't handy just for running errands. Economists use lists to help decipher the market. In this lesson, we'll explore two such important lists, called supply schedules and demand schedules, which are lists economists make in order to quantify supply and demand.

Supply and Demand

Before we talk about the lists themselves, we should probably discuss just exactly what information we are putting in those lists! In this case, we are talking about two of the most important factors in determining the health of the economic marketplace: supply and demand.

Demand is the amount of a certain good or service consumers are willing to purchase at a given price. For example, if you or I have $4.00 to spend on apples and apples only cost $0.50, we can buy eight apples! However, if the price of apples goes up to $1.00, we can only buy four apples. In other words, in our tiny little apple-based economy, the quantity demanded has shifted from eight to four with the increase in price.

While price is the most important factor in determining demand, it is by no means the only thing. Various other factors impact demand, such as consumers substituting cheaper, similar goods for more expensive products, rises or drops in consumer income, demographics, or cultural fads and tastes. Moreover, demand for an entire national or global market usually fluctuates far more than in our example above. For example, while 200 million Americans might purchase an apple at $0.50, maybe 180 million will still purchase that apple at $1.00, but only 60 million will buy an apple at $1.50. How fast demand drops off often depends on these extra factors.

Supply, on the other hand, looks at the opposite side of the equation. Supply tells us how many of a certain good or product producers are willing to provide at a certain price. As you might expect, the higher the price of a certain good, the more of that good producers are willing to provide as that higher price begets a higher profit for the producer. For example, assuming it costs apple growers $0.05 to produce each apple each year, they are certainly going to try to produce more apples in a year when apples cost $1.00 than they are in years when apples cost $0.50; each extra apple sold would garner them an extra $0.50!

Supply, like demand, is subject to numerous external factors. Producers, especially of produce like apples, often diversify their production in multiple goods to minimize the impact of down years. In addition, supply can be affected by things like natural disasters or producers stopping production altogether and making goods scarcer.

Schedules

Now that we've established the basics of supply and demand, we can talk about the lists economists make in order to quantify supply and demand. These lists are called demand schedules and supply schedules and are compiled by economists to show how much of each product the market will buy at which price and how much of each good producers are willing to provide at each price.

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